Emerging Market Economist, Emerginomics

Tatiana Orlova

Emerging Market Economist

Emerginomics

Cross Asset Strategy

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<p>An unexpected “hawkish” comment by Fed Chair Powell following the July Fed policy meeting jolted global markets out of complacency. President Trump’s tweets about new trade tariffs on Chinese goods, posted a day later, destroyed the remnants of the risk-on mood. We think that these two developments, rather than the recently announced US sanctions targeting Russian sovereign debt, served as the primary triggers behind the recent rouble rout. The latest export dynamics are also worrying and show that demand for Russian exports (mostly commodities) is suffering from flagging global growth. The balance-of-payments 2Q data have revealed a sharp contraction in the current account surplus, owing mainly to the poor export performance. Given the bleak near-term outlook for the oil prices and a high likelihood of further outflows from risky assets, we expect USDRUB to move into the 66-68 range in the coming weeks. </p>
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An unexpected “hawkish” comment by Fed Chair Powell following the July Fed policy meeting jolted global markets out of complacency. President Trump’s tweets about new trade tariffs on Chinese goods, posted a day later, destroyed the remnants of the risk-on mood. We think that these two developments, rather than the recently announced US sanctions targeting Russian sovereign debt, served as the primary triggers behind the recent rouble rout. The latest export dynamics are also worrying and show that demand for Russian exports (mostly commodities) is suffering from flagging global growth. The balance-of-payments 2Q data have revealed a sharp contraction in the current account surplus, owing mainly to the poor export performance. Given the bleak near-term outlook for the oil prices and a high likelihood of further outflows from risky assets, we expect USDRUB to move into the 66-68 range in the coming weeks. 


Russia: US Sanctions Are Not The Main Reason for Rouble Rout

Founder & CEO. Oil markets macro-analysis., Vanda Insights

Vandana Hari

Founder & CEO. Oil markets macro-analysis.

Vanda Insights

Vanda Insights is a Singapore-based boutique provider of intelligence on the global energy markets, launched in September 2016. The venture was born out of a desire to extract the signal from the noise in the complex and often volatile oil markets. Our succinct and clear macro analysis is relied upon by thousands of readers globally, including those doing business directly or indirectly in the physical commodity and derivatives markets; wealth managers; governments, regulatory bodies and think-tanks; as well as trade organizations and educational institutions.

Global Energy Markets

Commodities

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<li>The Trump-Xi ceasefire and resumption of trade talks agreed in Osaka on Saturday has a long road ahead to reach a trade agreement. The US and China will not escalate their trade war, but are not withdrawing existing import tariffs against each other.</li>
<li>The two sides have not set a timeframe to forge a deal. The difficult issues that derailed the talks at the start of May, when the world believed that Washington and Beijing were close to the finish line, could take several months to work through. </li>
<li>As a result, the oil market will keep the economic headwinds firmly in sight. Expectations of lacklustre global oil demand growth, at least for 2019, are unlikely to change any time soon, encouraging oil bulls to continue laying low.</li>
<li>OPEC/non-OPEC ministers meeting on Monday and Tuesday are expected to extend their combined 1.2 million b/d of output cuts through the second half of the year. No surprises there, it has already been baked in.</li>
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The Trump-Xi ceasefire and resumption of trade talks agreed in Osaka on Saturday has a long road ahead to reach a trade agreement. The US and China will not escalate their trade war, but are not withdrawing existing import tariffs against each other.
The two sides have not set a timeframe to forge a deal. The difficult issues that derailed the talks at the start of May, when the world believed that Washington and Beijing were close to the finish line, could take several months to work through. 
As a result, the oil market will keep the economic headwinds firmly in sight. Expectations of lacklustre global oil demand growth, at least for 2019, are unlikely to change any time soon, encouraging oil bulls to continue laying low.
OPEC/non-OPEC ministers meeting on Monday and Tuesday are expected to extend their combined 1.2 million b/d of output cuts through the second half of the year. No surprises there, it has already been baked in.


Weekly Oil Views: Osaka Unlikely to Spur a Bull Run, OPEC+ Decision Already Baked In

Global Asset Allocation, Politics & Governance, Ecstrat

John-Paul Smith

Global Asset Allocation, Politics & Governance

Ecstrat

Ecstrat is a consultancy advising on asset allocation between global equity markets, with a focus on the intersection of governments, geopolitics, governance and markets.
 
Over the past few years and more especially since the Great Financial Crisis (GFC), investors have become more focused on short-term market movements and real-time returns and have consequently neglected the analysis of the underlying structural themes that underpin longer term performance.
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More specifically we believe that the evolution of governance-based relationships between investors, controlling shareholders, labour and the state is one of the primary determinants of both relative and absolute performance between individual equity markets.
 
We will endeavour to provide investors with some of the context surrounding governance-related issues which encompass many different disciplines including history, economics and political science, as well as the financial metrics which are the most obvious manifestation of the structural characteristics of each market.
 
We will pay particular attention to the shifts and potential inflection points for governance in individual markets as these are often the best lead indicators for both economic and market performance.

<h2><strong>Many foreign policy experts still underestimate the significance of Putin’s pivot to China</strong></h2><p>The most significant development in Russia’s foreign policy over recent years beyond the borders of the former Soviet Union, has been the development of a much closer political relationship with China contrary to the expectations of most observers.</p><p>Historically, Russian leaders have tended to look towards the West and to operate a largely independent foreign policy based on Russia’s perceived self-interest, taking each issue on its own merits. This attempt to play a balancing role now seems to have ended following the breakdown in the relationship with the West, resulting in Putin’s pivot towards China, which might have occurred at the worst possible time from a geopolitical and economic perspective.</p>

Many foreign policy experts still underestimate the significance of Putin’s pivot to ChinaThe most significant development in Russia’s foreign policy over recent years beyond the borders of the former Soviet Union, has been the development of a much closer political relationship with China contrary to the expectations of most observers.Historically, Russian leaders have tended to look towards the West and to operate a largely independent foreign policy based on Russia’s perceived self-interest, taking each issue on its own merits. This attempt to play a balancing role now seems to have ended following the breakdown in the relationship with the West, resulting in Putin’s pivot towards China, which might have occurred at the worst possible time from a geopolitical and economic perspective.

China and Russia; an Axis of Authoritarianism

<p>Oil remains in a tug-of-war between fundamentals and a fickle sentiment in the global financial markets.</p>
<p>Brent and WTI futures settled at fresh four-month-highs of $68.50/barrel and $59.98/barrel mid-week, but had erased all the gains -- and some more -- by Friday's close.  However, technicals point to a pivot point in crude futures, with the 50-day moving average crossing over the 100 DMA last week. That's typically a buy signal, but a sustained rally from the current levels is hard to see in the near-term.</p>
<p>Meanwhile, there were some interesting and unexpected outcomes from a high-profile OPEC/non-OPEC monitoring committee meeting in Baku on March 18. Among them were signs of a divergence in the views of Saudi Arabia and Russia, de facto leaders of the 24-producer alliance curbing supply to rebalance the market.</p>
<p> What explains Saudi Energy Minister Khalid al-Falih’s new hawkish stance and is the OPEC and non-OPEC partnership under some strain? Our short answer: No. We lay out our perspective of the evolving dynamics in the producers' alliance, which is important to understanding the likely path of their collaboration.</p>

Oil remains in a tug-of-war between fundamentals and a fickle sentiment in the global financial markets.
Brent and WTI futures settled at fresh four-month-highs of $68.50/barrel and $59.98/barrel mid-week, but had erased all the gains -- and some more -- by Friday's close.  However, technicals point to a pivot point in crude futures, with the 50-day moving average crossing over the 100 DMA last week. That's typically a buy signal, but a sustained rally from the current levels is hard to see in the near-term.
Meanwhile, there were some interesting and unexpected outcomes from a high-profile OPEC/non-OPEC monitoring committee meeting in Baku on March 18. Among them were signs of a divergence in the views of Saudi Arabia and Russia, de facto leaders of the 24-producer alliance curbing supply to rebalance the market.
 What explains Saudi Energy Minister Khalid al-Falih’s new hawkish stance and is the OPEC and non-OPEC partnership under some strain? Our short answer: No. We lay out our perspective of the evolving dynamics in the producers' alliance, which is important to understanding the likely path of their collaboration.

Weekly Oil Views: Another Crude Rally Fails to Stick as Technicals Signal a Pivot Point

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<p><strong>The recent softening of the Fed’s monetary stance and hopes that the US and China should reach a new trade agreement in March have boosted demand for EM currencies. We think that the Central Bank of Russia is one of those EM banks that may switch into an easing mode before the year is out. Besides, the oil market is in an upbeat mood again. Although the US is determined to impose further “biting” sanctions against Russia, a few months delay is likely due to the busy domestic agenda of the US Congress, and the current focus on more pressing issues. Given these conditions, we are bullish on the rouble in the short term. We are also expecting further gains by Russia’s OFZs and sovereign Eurobonds, especially if the oil rally continues.</strong></p>
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The recent softening of the Fed’s monetary stance and hopes that the US and China should reach a new trade agreement in March have boosted demand for EM currencies. We think that the Central Bank of Russia is one of those EM banks that may switch into an easing mode before the year is out. Besides, the oil market is in an upbeat mood again. Although the US is determined to impose further “biting” sanctions against Russia, a few months delay is likely due to the busy domestic agenda of the US Congress, and the current focus on more pressing issues. Given these conditions, we are bullish on the rouble in the short term. We are also expecting further gains by Russia’s OFZs and sovereign Eurobonds, especially if the oil rally continues.


Russian Assets to Benefit from Higher Oil Prices and Busy US Congressional Agenda

Russia

Rosneft Oil Company produces and markets petroleum products. The Company explores, extracts, refines, and markets oil and natural gas. Rosneft produces oil in Western Siberia, Sakhalin, the North Caucasus, and the Arctic regions of Russia.

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Rosneft Oil PJSC (ROSN RM)

Russia: US Sanctions Are Not The Main Reason for Rouble Rout

An unexpected “hawkish” comment by Fed Chair Powell following the July Fed policy meeting jolted global markets out of complacency. President...

Tatiana Orlova

Weekly Oil Views: Osaka Unlikely to Spur a Bull Run, OPEC+ Decision Already Baked In

The Trump-Xi ceasefire and resumption of trade talks agreed in Osaka on Saturday has a long road ahead to reach a trade agreement. The US and...

Vandana Hari

China and Russia; an Axis of Authoritarianism

Many foreign policy experts still underestimate the significance of Putin’s pivot to ChinaThe most significant development in Russia’s foreign...

John-Paul Smith

Weekly Oil Views: Another Crude Rally Fails to Stick as Technicals Signal a Pivot Point

Oil remains in a tug-of-war between fundamentals and a fickle sentiment in the global financial markets. Brent and WTI futures settled at fresh...

Vandana Hari

Russian Assets to Benefit from Higher Oil Prices and Busy US Congressional Agenda

The recent softening of the Fed’s monetary stance and hopes that the US and China should reach a new trade agreement in March have boosted demand...

Tatiana Orlova

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