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On September 2nd, Bank of New Zealand (BNZ) stated that a September rate hike by the Reserve Bank of New Zealand (RBNZ) is a foregone conclusion. The RBNZ is expected to hint at further rate hikes before the cash rate reaches or exceeds the neutral level, with a peak of approximately 3.5%. However, BNZs internal view is that the RBNZ will ultimately raise rates by 25 basis points at each meeting, reaching 4.0% by May 2027. Downside risks to the economy are more prominent, including a potential El Niño-induced recession, election-related delays in recovery, and a broader global asset price correction. On the upside, structural inflationary pressures may continue to accumulate regardless of the RBNZs response. BNZs core view stems from the RBNZs July statement that "further reduction in monetary stimulus may still be necessary" to bring inflation back to target. BNZ expects inflation to remain above the target range until mid-2027, forecasting an annual CPI of 3.7% for the September quarter, significantly higher than the RBNZs own forecast of 3.3%.On Wednesday, September 2, the Hang Seng Index opened down 48.91 points, or 0.19%, at 25,280.82; the Hang Seng Tech Index opened down 18.66 points, or 0.41%, at 4,532.22; the H-share Index opened down 15.39 points, or 0.18%, at 8,447.25; and the Red Chip Index opened down 8.28 points, or 0.2%, at 4,129.92.Hong Kong stocks opened lower, with the Hang Seng Index down 0.19% and the Hang Seng Tech Index down 0.41%. Biopharmaceutical stocks led the gains, while gold stocks fell sharply. Zijin Mining International (02259.HK) fell more than 4%.On September 2nd, the highest 7-day annualized yield of Tencent Wealth Managements "Current Account +" was 1.1340%, and the lowest was 0.7020%. The highest 7-day annualized yield of WeChat Pays "Lingqian Tong" was 1.1010%, and the lowest was 0.8700%. The highest 7-day annualized yield of Alipays "Yuebao" was 1.0650%, and the lowest was 0.8690%.September 2nd - ASB Bank of New Zealand stated that with financial markets having almost fully priced in a 25 basis point rate hike, there is limited room for a hawkish surprise in the decision itself. The ASB expects at least one more rate hike before the end of the year, with a peak rate of around 3.3%, slightly below current market pricing. If this occurs as expected, it could lead to a mildly dovish repricing at the front end of the New Zealand yield curve, putting some pressure on the New Zealand dollar. The ASB also noted that tightening financial conditions (including a stronger trade-weighted index and rising swap rates) are a theme the Reserve Bank of New Zealand is likely to cite, weakening the case for a particularly hawkish statement. Given the two-way risks to the medium-term inflation outlook, currency and interest rate markets are likely to remain highly sensitive to New Zealand data in the coming months, regardless of Wednesdays outcome.

Natural Gas Prices Jumped 5% After A Three-week Drop of 50%

Haiden Holmes

Jan 10, 2023 10:52

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The price of natural gas jumped by more than 5% on Monday as longs attempted to offset three weeks of losses that resulted in a decrease of more than 50% since the closing of November.


As trading for the second week of January began at the Henry Hub of the New York Mercantile Exchange, gas futures rose by up to 11 percent immediately. Nonetheless, as the day progressed, the market's upward momentum diminished, resulting in a closing price that was about half of the session's price peak.


On Friday, the Henry Hub gas contract for February was settled at $3.91 per mmBtu, an increase of 20 cents or 5.4%. Earlier in the day, February gas prices reached a high of $4.123 per mmBtu.


It was an incremental increase for a contract that lost 76.50 cents, or 17.1%, last week and 35.0% during the preceding two weeks.


Natural gas futures had a dramatic decrease beginning in December 2022, following spectacular upward price action throughout most of 2022 due to weather extremes and a supply squeeze caused by political and other barriers to Russian gas output in the aftermath of the Ukraine invasion. Due to unusually warm winter temperatures over the past month, heating markets in both Europe and the United States are now amply supplied.


In view of forecasts expecting extremely warm temperatures across the United States until at least January 12, meteorological indicators indicate the probability of more fuel price decreases.


Despite this, a number of analysts remain bullish on the gas market for the following two weeks.


There are some positive aspects of the U.S. gas market. Gelber & Associates, a Houston-based energy markets consulting firm, warned in a letter published on Monday that the European (ECMWF) and Climate Forecast System Version 2 (CFSv2) weather forecast models indicate another potentially frigid weather pattern transition by late January into February.


If this estimate materializes, it might lead to withdrawals of 200 billion cubic feet or more in the coming weeks. Lastly, longer-range 'analog' models suggest that below-average temperatures could be a recurring issue until late March or April."


The U.S. Energy Information Administration has documented withdrawals in excess of 200 billion cubic feet (bcf) during the past two weeks. This would be considered optimistic under normal circumstances, but the unexpectedly warm start to the 2022/23 winter has recently altered market expectations for draws.

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