Market round-up: Better outlook for oil demand in 2017
In other news, US inflation’s cold streak seen ending for real; China’s banks lead surge in overseas lending
Strong year-on-year (y-o-y) oil demand growth in the June quarter has prompted the International Energy Agency (IEA) to consider an upward revision in global oil demand estimates for 2017. Estimates of global oil demand growth in the current year have been revised up again, this time by 0.1 million barrels per day (mb/d), to 1.6 mb/d, said the organization in its latest oil market report. “Oil demand grew by 1.2 mb/d y-o-y in 1Q17, and accelerated to 2.3 mb/d in 2Q17, due to a combination of solid non-OECD demand and very strong OECD consumption,” added IEA. OECD is short for the Organisation for Economic Co-operation and Development.
US inflation’s cold streak seen ending for real
After five months of misses on US inflation, economists say this time is different. A report on Thursday is due to show that consumer prices excluding energy and food—the so-called core index—rose 0.2% in August from July, according to the median estimate of analysts surveyed by Bloomberg. Analysts have stuck with the 0.2% projection heading into every run of the labour department data this year—a figure that’s proved too high each month since March. That’s resulted in the weakest stretch of price growth since 2010. With unemployment near a 16-year low, the data has spurred some Federal Reserve officials to start questioning one of their bedrock theories—that a strong labour market will cause inflation to drift upwards. While central bankers are likely to forge ahead next week with plans to start reducing their $4.5 trillion balance sheet, another undershoot on core consumer price inflation may mean a delay for the December interest-rate increase that the Fed has telegraphed for several months. Bloomberg
China’s banks lead surge in overseas lending
Banks from China, Japan and Canada have overseen a surge in overseas lending since the financial crisis, helping to cushion a deep slide in cross-border capital flows thanks especially to a retreat by European banks, according to the McKinsey Global Institute. While the stock of global foreign holdings—including loans, equities, bonds and foreign direct investment—has remained about the same since 2007 at 183% of world gross domestic product, gross flows of capital across borders have plunged 65%. Much of that has been due to European banks refocusing on their domestic markets as the euro crisis and new capital rules took hold, McKinsey said in a study on financial globalization. Key exceptions have been banks in China and Japan, which have funded their countries’ companies abroad and, in Japan’s case, sought to escape low margins and scant lending opportunities at home. Canadian banks are another outlier, having expanded their overseas operations mainly in the US. Bloomberg