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NEW YORK – Oil prices rose slightly on Thursday in up-and-down trade, supported by an OPEC forecast for demand growth and data showing a US easing labor market and slowing inflation which stoked hopes for Federal Reserve rate cuts despite recent comments from Fed officials.

Brent crude futures settled at USD 82.75 a barrel, up 15 cents, or 0.2%. West Texas Intermediate (WTI) US crude futures settled at USD 78.62 a barrel, gaining 12 cents, or 0.2%. Both benchmarks had gained nearly 1% in the previous session.

Fresh comments by the Organization of Petroleum Exporting Countries also helped boost crude prices.

The organization expects demand to grow to 116 million barrels a day by 2045, and possibly higher, OPEC Secretary General Hathaim Al Ghais said on Thursday in a rebuke of an International Energy Agency report predicting peak oil consumption by 2029.

Al Ghais, writing in Energy Aspects, called the IEA report “dangerous commentary, especially for consumers, and (that) will only lead to energy volatility on a potentially unprecedented scale.”

The US Labor Department said the producer price index (PPI) for final demand dropped 0.2% on a month-to-month basis in May. Economists polled by Reuters had forecast a 0.1% increase. Separate data showed weekly initial jobless claims exceeded estimates to reach a 10-month high.

On Wednesday, the Fed held interest rates steady and pushed out the projected start of policy easing to as late as December. In a press conference after the end of the US central bank’s two-day policy meeting, Fed Chair Jerome Powell said inflation had fallen without a major blow to the economy.

Powell’s comments “implying no definitive time frame for a rate reduction appeared to place additional pressure on the energy complex,” said Jim Ritterbusch of Ritterbusch and Associates.

Higher borrowing costs tend to dampen economic growth and can limit oil demand.

Tomorrow, investors will turn their sights to the University of Michigan’s Consumer Sentiment Index for signs of US economic strength or weakness.

“Last month, the number came in much weaker than anticipated, with the surprise print spawning volatility in the oil patch as traders viewed the lame number as a negative demand indicator,” said Bob Yawger, director of energy futures at Muzuho.

On the supply side, US crude stockpiles rose more than expected last week, driven largely by a jump in imports, while fuel inventories also increased more than expected, data from the Energy Information Administration showed on Wednesday.

Oil traders are also watching continuing talks over a potential ceasefire in Gaza, which could ease fears of oil supply disruptions in the region.

In the latest attack on shipping, Iran-allied Houthi militants on Wednesday took responsibility for small watercraft and missile attacks that left a Greek-owned coal carrier in need of rescue near Yemen’s Red Sea port of Hodeidah.

(Additional reporting by Ahmad Ghaddar, Sudarshan Varadhan in Singapore, and Paul Carsten in London; Editing by Jason Neely, David Goodman, David Gregorio, and Paul Simao)

Asia’s market spotlight on Friday shines brightly and almost exclusively on the Bank of Japan, notably the degree and pace at which it intends to continue normalizing monetary policy in the world’s third-largest economy.

The BOJ follows the European Central Bank last week and the US Federal Reserve on Wednesday to complete the G3 central bank set, with investors keen to gauge policymakers’ appetite for accelerating the exit from decades of ultra-easy policy.

All Japanese assets will be sensitive to the decision and guidance, but the broader ripple effects could be felt most in global currency markets if the yen moves significantly.

Wholesale price inflation from India and New Zealand’s latest manufacturing purchasing managers index are released on Friday. Investors across the region are mostly in buoyant spirits following the surge in risk appetite after the Fed and perhaps more significantly, the latest US inflation figures.

But all eyes are on the BOJ. Sources have told Reuters the BOJ will discuss whether to taper its bond purchases, but that the decision would depend on market developments leading up to the meeting.

There was a slight ‘risk off’ response to the Fed’s revised economic projections and Chair Powell’s press conference. But any caution was washed away by a huge wave of ‘risk on’ activity following the soft producer and consumer inflation data.

Emerging market and Asia-ex Japan stock indexes are up, world stocks hit a new high on Wednesday, the S&P 500 and Nasdaq on Thursday posted their fourth consecutive daily closing highs, cross-asset volatility is lower and credit spreads are tighter.

If BOJ policymakers are looking for a benign set of global conditions in which to begin tapering their bond purchases, this could be it.

The domestic scenario may be a little murkier with bond yields elevated and the yen still anchored at historically weak levels. But yields are off their highs and stocks have flat-lined for two months, so why not start the taper now?

Investors in China, meanwhile, will be looking forward to closing out a bruising week. Stocks are on for a fourth straight weekly loss, their worst run this year, while the yuan is anchored near its lows for the year and on Thursday registered its biggest fall on the spot market in three months.

Trade war fears are growing, and this week it was Europe-China tariffs that grabbed the headlines after the European Union slapped new tariffs on electric vehicles imported from China.

Auto stocks dragged European shares lower on Thursday, the pan-European STOXX 600 index sliding 1.3% for its biggest fall in two months. Beijing’s response, whenever it comes, could send negative shocks through Chinese stocks.

Here are key developments that could provide more direction to markets on Friday:

– Japan interest rate decision

– India wholesale inflation (May)

– New Zealand manufacturing PMI (May)

(Reporting by Jamie McGeever)

HONG KONG (Reuters Breakingviews) – As one of the world’s most expensive cities Hong Kong rarely enjoys any price advantage over China. One exception is found in the stock market. For years many dual-listed firms in the finance hub have traded at hefty discounts to their mainland equivalent. That gap may ease as Beijing pushes for higher dividend payouts.

The Hang Seng Stock Connect China AH Premium Index was in February on the verge of breaking through 158, its highest level since the 2008-2009 global financial crisis. The difference between the ’A’ and ’H’ shares gauges relative enthusiasm for Chinese stocks on the mainland and in Hong Kong. When it’s above 100, onshore stocks trade at a premium to their equivalents offshore.

Hong Kong has been a lesser priority as Chinese regulators scrambled to prop up the world’s worst-performing market. The “national team”, including state-owned firms, focused on buying stocks onshore in Shenzhen and Shanghai, and the muted interest of foreign investors that dominate Hong Kong trading worsened the gap.

The AH Premium Index, however, is now easing. Wu Qing, the new-ish chair of China Securities Regulatory Commission, in April announced a flurry of measures, including the expansion of the Stock Connect cross-border investment scheme, to promote Hong Kong’s status as a global financial centre. At 140, the indicator is only seven percentage points above its 10-year average.

Some state-owned heavyweights are still trading in Hong Kong at bigger-than-usual discounts. As of June 11, the A shares of USD 10 billion China Life Insurance 601628.SS, 2628.HK, for instance, are worth three times its H shares after taking the currency exchange rate into account.

The gap translates into a huge discrepancy in yields. Chinese-listed firms announced record cash dividends totalling 2.2 trillion yuan (USD 300 billion) last year, per Reuters, and Beijing is pushing for more payouts to entice households to put more savings into stocks. It faintly echoes the Tokyo Stock Exchange’s effort that has helped push the Nikkei benchmark to record highs.

One likely side-effect may be more buying of Hong Kong stocks by Chinese investors anxious for returns. Citing unnamed sources, Bloomberg reported last month that China is planning to waive a 20% dividend tax on individual mainland investors buying Hong Kong stocks via Stock Connect. A more bullish mood in the Asian finance hub could even help to buoy sentiment onshore.

CONTEXT NEWS

The Hang Seng Stock Connect China AH Premium Index was trading at 139.9 on June 11. The index measures the valuation gap for Chinese dual-listed companies whose stocks trade as A-shares on the mainland and H-shares in Hong Kong. When it’s above 100, onshore stocks trade at a premium to their equivalents offshore.

Wu Qing has rolled out a raft of measures to promote the investment worthiness of Chinese stocks since becoming chair in February of China Securities Regulatory Commission. Companies are required to draw up plans for stock purchases in the event of share price slumps, and profitable companies that fail to draw up dividend payout plans can be put on a delisting watchlist.

(Editing by Una Galani and Aditya Sriwatsav)

HOUSTON – Oil settled higher on Wednesday as ongoing tensions in the Middle East lent support to prices, but news that interest rate cuts could start as late as December capped gains, following the Federal Reserve’s statement concluding its two-day meeting.

Brent crude futures settled 68 cents, or 0.83%, higher at USD 82.60 a barrel, with US West Texas Intermediate (WTI) crude futures up 60 cents, or 0.77%, to USD 78.50.

Prices had eased more than 2% last week after OPEC and its allies said they would phase out output cuts starting from October.

Palestinian militant group Hamas has proposed numerous changes, some unworkable, to a US-backed proposal for a ceasefire with Israel in Gaza, US Secretary of State Antony Blinken said on Wednesday, adding that mediators were determined to close the gaps.

At a press conference with Qatar’s prime minister in Doha, Blinken said some of the counter-proposals from Hamas, which has ruled Gaza since 2007, had sought to amend terms that it had accepted in previous talks.

The war has yet to materially affect global oil supply, but investors have priced in the risk, boosting crude futures prices.

Meanwhile, investors were left disappointed after the Federal Reserve pushed out the start of rate cuts to perhaps as late as December, with officials projecting only a single quarter-percentage-point reduction for the year amid rising estimates for what it will take to keep inflation in check.

US consumer price data, published on Wednesday, had reinforced expectations of a Fed rate cut in September. Fed Chair Jerome Powell will hold a press conference later on Wednesday.

“It will be interesting to see what Powell says, I don’t think there is any doubt that they will leave rates where they are,” said Ben McMillan, a fund manager for IDX Advisors.

Higher borrowing costs tend to dampen economic growth, and could, by extension, limit oil demand.

“The market is holding its breath right now,” said Tim Snyder, economist at Matador Economics.

“If Powell talks outside of what the Fed publishes, there could be a little discord within the policy committee as to their direction on interest rates,” Snyder added.

Elsewhere, European Central Bank Vice President Luis de Guindos said the ECB must move “very slowly” in reducing interest rates, because of huge uncertainty over the inflation outlook.

US crude stocks posted a surprise build last week, up by 3.7 million barrels to 459.7 million barrels, compared with expectations of a 1 million barrel draw, the Energy Information Administration (EIA) said on Wednesday.

Gasoline stocks rose more than expected, up by 2.6 million barrels to 233.5 million barrels, the EIA said, compared with analysts’ expectations in a Reuters poll for a 900,000-barrel build.​

However, longer term, the EIA, the International Energy Agency (IEA), and the Organization of the Petroleum Exporting Countries this week updated their views on the global oil demand-supply balance for 2024, predicting declines in global oil inventories.

Their reports imply limited downside for prices in the second half of the year, said Tamas Varga of oil broker PVM, with the IEA seeing a larger depletion in inventories than the other two.

(Reporting by Georgina McCartney in Houston, Natalie Grover in London, Arathy Somasekhar in Houston, and Emily Chow in Singapore; Editing by Kirsten Donovan, Tomasz Janowski, and Leslie Adler)

Softer-than-expected US inflation lit a fuse under investor risk appetite and asset prices on Wednesday which should fire up animal spirits across Asia on Thursday, although a hawkish tilt in the Fed’s new economic projections could put a lid on things.

The Fed’s revised outlook – fewer rate cuts this year, slightly higher unemployment, a higher long-term policy rate – cooled equity, FX, and fixed income markets late in the US session on Wednesday. Quite significantly, in the end.

But it was not enough to puncture the US ‘soft landing’ narrative and the market impact was clear – record highs for the S&P 500, Nasdaq and world stocks, and declines in US bond yields, the dollar, and cross-asset volatility.

That is a friendly mix of market conditions and sentiment for investors in Asia and across emerging markets on Thursday. Not for the first time recently, however, the dark cloud in an otherwise blue sky appears to be China.

Cooling price pressures may be welcome in the US economy and most economies around the world, but not in China, which remains blighted by the threat of deflation, tepid consumer demand, an imploding property sector, and fragile growth.

Figures on Wednesday showed that disinflationary pressures in China and even outright deflation persist, intensifying the pressure on Beijing to come in with heavy fiscal or monetary stimulus. Or both.

The cumulative effect on Chinese assets recently is notable – stocks and the yuan have tumbled, prompting state-owned banks to sell dollars to shore up the currency and reviving doubts about China as an investment destination.

Chinese stocks have lost 5% in the last three weeks, twice as much as the MSCI Asia ex-Japan index, and significantly under-performing Japan’s Nikkei, which has basically flatlined, and US and global stocks, which have risen to new peaks.

The yuan hit a seven-month low on Tuesday but rallied strongly on Wednesday. Perhaps it – and other currencies in Asia – will take advantage of the dollar’s weakness on Thursday.

On the other hand, the European Commission’s decision to impose extra duties of up to 38.1% on imported Chinese electric cars from July, will escalate investors’ concerns over trade wars between China and the West.

Beijing will likely retaliate, but how?

The Asia & Pacific economic calendar on Thursday is light, with a central bank policy decision in Taiwan and Australian unemployment figures the main releases.

Taiwan’s central bank is expected to hold its benchmark discount rate at 2.00% on Thursday and keep it there until late next year as it deals with persistent concerns over inflation.

Australia’s unemployment rate, meanwhile, is seen easing back to 4.1% from 4.0%, and job growth is seen slowing to 30,000 from 38,500.

Here are key developments that could provide more direction to markets on Thursday:

– Taiwan interest rate decision

– Australia unemployment (May)

– Thailand consumer confidence (May)

(Reporting by Jamie McGeever; Editing by Josie Kao)