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Futures news on May 9: 1. The trading volume of WTI crude oil futures was 918,368 lots, an increase of 41,059 lots from the previous trading day. The open interest was 1,974,970 lots, an increase of 10,816 lots from the previous trading day. 2. The trading volume of Brent crude oil futures was 205,738 lots, an increase of 7,016 lots from the previous trading day. The open interest was 185,456 lots, an increase of 4,757 lots from the previous trading day. 3. The trading volume of natural gas futures was 496,937 lots, a decrease of 46,740 lots from the previous trading day. The open interest was 1,515,774 lots, an increase of 4,492 lots from the previous trading day.On May 9, Morgan Stanley issued a report stating that although the price of Ideal Autos (02015.HK) new L series has not been adjusted, the configuration has been significantly upgraded, which is in line with market expectations overall. However, the market is still discussing whether it is enough to cope with the fierce market competition only through the configuration and autonomous driving (AD) upgrade of the new L series without adjusting the suggested retail price. It remains to be seen whether monthly sales can return to the average level of about 50,000 units in the second half of the year. Morgan Stanley believes that the current market price is about less than 20 times the 2025 forecast price-to-earnings ratio, and the risk-return of the stock is attractive, especially after the release of the new L series on May 8 and the launch of the BEV model this summer. Although weak first-quarter results may become a pressure in the short term, the market has made reasonable expectations for this.On May 9, HSBC Research published a report, expecting Xiaomi (01810.HK) to perform better than expected in the first quarter of this year, with net profit expected to increase 1.39 times year-on-year to RMB 10 billion, mainly driven by a 50% year-on-year increase in IoT revenue, strong electric vehicle sales, and improved profit margins of various businesses. The bank expects the gross profit margins of IoT and electric vehicles to increase from 20.5% and 20.4% in the fourth quarter of 2024 to 23% and 21.4% in the first quarter of this year, respectively, mainly due to higher pricing power and optimized product portfolio. The bank raised Xiaomis target price from HK$70.4 to HK$73.5, maintaining a buy rating; and raised net profit forecasts for 2025 to 27 by 7%, 4% and 4% respectively. It is expected that orders for the electric car SU7 in May will normalize to more than 30,000 units, compared with a peak of 80,000 units in March, and believes that the YU7, which will be launched in June, will boost electric vehicle sales in the third quarter of this year.On May 9, Nomura issued a report stating that Hua Hong Semiconductor (01347.HK) reiterated its neutral rating and raised its target price by 116% from HK$16.4 to HK$35.4 due to strong local demand. However, although the groups pricing conditions have improved, the fixed cost burden may still exist, so the neutral rating is maintained. The report stated that Hua Hong Groups first-quarter revenue was in line with its guidance target, and the gross profit margin of 9.2% was lower than expected. Nomura believed that this may be due to the depreciation of the new plant. Due to the continued demand momentum, management predicts that the second-quarter revenue will increase by 3.5% quarter-on-quarter. Although Hua Hong Semiconductor believes that the price of 8-inch wafer foundry is under pressure (no price reduction yet), due to the shortage of supply, the price of 12-inch wafer foundry is expected to continue to rise. Nomura also believes that this is a good sign for the overall price dynamics of mature node wafer foundry in Asia.On May 9, Swedens Nordic Bank pointed out that the Federal Reserve is waiting for more clarity as risks rise. Both trade policy and the economic outlook are seen as extremely uncertain, and the Federal Reserve wants to wait for clearer results. The market interpreted this information as slightly hawkish and further reduced the possibility of a rate cut at the June meeting. We agree with this change in the market, but expect the Federal Reserve to ultimately focus on supporting economic growth and ignore the temporary rise in inflation. If long-term inflation expectations remain within a controllable range and consistent with the inflation target, the Federal Reserve should be able to ignore the temporary inflation shock caused by tariffs. There is also a possibility that the short-term impact of tariff uncertainty on the economy will be greater than currently expected. But for now, the Federal Reserve believes that the move will have limited impact on the economy, and there are some signs of progress in trade negotiations. Inflation is still above target and is expected to start rising again due to tariffs.

Oil Prices Recoup Weekly Losses on The Prospect of Reduced Supply

Haiden Holmes

Feb 24, 2023 11:49

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Oil prices rose on Friday and were close to trading in the black for the week, as the prospect of deeper-than-anticipated cuts in Russian supplies outweighed worries that rising interest rates will dampen demand this year.


Crude prices marked a strong recovery from recent losses on Thursday as a Reuters report indicated that Russia plans to cut up to 25 percent of oil exports from its western ports in March, which is more than the 500 thousand barrels per day supply cut announced earlier.


By 21:06 ET, Brent oil futures increased 0.3% to $82.75 per barrel, whereas West Texas Intermediate crude futures increased 0.8% to $75.97 per barrel (02:06 GMT). Both contracts were trading down less than 0.5% for the week, having reduced their initial losses substantially.


The possibility of deeper Russian supply cuts helped markets overlook a larger-than-anticipated increase in U.S. petroleum inventories, which rose for the ninth consecutive week despite a slowdown in domestic consumption.


Fears of a further decline in petroleum demand weighed on oil prices this week, as hawkish signals and economic data flooded the market. The Fed's hawkish posture was strengthened by signs of resilience in the U.S. labor market and by high inflation readings for January and the fourth quarter.


The dollar's strength also weighed on crude markets, as a stronger currency makes oil more expensive for international buyers.


Focus is now on the Fed's preferred inflation gauge, the Personal Consumption Expenditures price index, for additional monetary policy indicators. It is anticipated that the reading will confirm that inflation remained elevated through January.


Thursday's downward revision of U.S. GDP data for the fourth quarter suggests that rising interest rates may have had a greater impact than anticipated on the U.S. economy thus far. While slowing growth portends unfavorably for crude demand, it could also reduce the Fed's room to continue raising interest rates.


This week's high inflation rates in Singapore, the Eurozone, and Japan have also raised concerns about tightening global monetary conditions. Oil prices are trading lower for the year amid persistent concerns of a global recession this year.


Despite this, oil investors continue to anticipate a rebound in Chinese demand after the world's largest oil importer relaxed the majority of anti-COVID measures this year.


However, early economic indicators from the country indicate that portions of the economy continue to struggle in the wake of the pandemic.