Oil prices edge up as US supply tightens, Iran sanctions loom

Oil prices edged up on Wednesday following a report of tightening US fuel inventories amid an outage at Syncrude Canada oil sands facility in Alberta, which usually supplies the United States. Prices were also pushed up by looming US sanctions against Iran, which threaten to cut supplies to an already tight market despite pledges by producer cartel OPEC to raise output to make up for the disruptions.

US West Texas Intermediate (WTI) crude futures rose 46 cents, or 0.6 per cent, to $74.60 a barrel at 0343 GMT, compared with their last settlement. On Tuesday, WTI hit its highest since November 2014 at $75.27. Brent crude futures were changing hands at $78.10 per barrel, up 34 cents, or 0.4 per cent, from their last close. Trading activity is expected to be limited on Wednesday by the US Independence Day holiday.

US crude inventories fell by 4.5 million barrels to 416.9 million barrels in the week to June 29, the American Petroleum Institute (API) said on Tuesday. Gasoline and distillate stocks, which include diesel and heating oil, also fell, the API said. “The draw in distillates was against expectations,” said Sukrit Vijayakar, managing director of energy consultancy Trifecta.

The decline in fuel inventories was largely down to the outage at Syncrude Canada’s 360,000 barrels per day (bpd) oil sands facility near Fort McMurray, Alberta. The outage is expected to last through July. But brokerage Phillip Futures said the lower stocks come “as gasoline demand spikes on peak driving season in the northern hemisphere”.

Outside North America, looming US sanctions against major oil exporter Iran were the focus of attention. The US government has demanded that all countries stop buying Iran’s oil from November.

To make up for potential shortfalls in supply from Iran and other disruptions including in Libya and Venezuela, the Organization of the Petroleum Exporting Countries (OPEC) has agreed with Russia and other oil-producing non-OPEC members to raise output from July.

OPEC-member Iran, however, has warned it would not accept other producers reaping the benefits by taking its market share. Iran’s President Hassan Rouhani on Tuesday said it was ”unwise to imagine that some day all producer countries will be able to export their surplus oil and Iran will not be able to export its oil.”

Mutual funds’ average AUM up 28% in June quarter

The average assets under management (AUM) of the mutual fund industry increased 28 per cent in the June quarter to 23.4-lakh crore against 18.3-lakh crore in the March quarter on the back of strong inflows through systematic investment plans (SIPs).

The AUM is up 20 per cent, compared to the last-year figure of 19.52-lakh crore. ICICI Prudential Mutual Fund topped the list, recording an average AUM of 3.1-lakh crore in the June quarter, against 3.06-lakh crore in the March quarter. It was followed by HDFC Mutual Fund with an AUM of 3.06-lakh crore (3-lakh crore) and Aditya Birla Sun Life at 2.49-lakh crore (2.47-lakh crore). The average AUM of Reliance Nippon Mutual Fund was at 2.4-lakh crore (2.45-lakh crore) and that of SBI at 2.33-lakh crore (2.18-lakh crore).

NS Venkatesh, Chief Executive Officer, Association of Mutual Funds in India, said that despite the recent volatility in the market, mutual funds continued to see strong inflows through the SIP route.

Investments from retail investors remain robust, especially from beyond Top-30 cities, he added. The investor awareness campaign Mutual Funds Sahi Hai, run by AMFI under SEBI guidance, has generated a lot of interest among potential investors, who are now looking at mutual funds as a preferred investment option, he added.

May outflow

The growth in the June quarter would have been much higher if not for the outflow recorded in May.

The assets under the mutual fund industry were down 2.83 per cent to 22.60-lakh crore in May, compared to April.

On the whole, the industry witnessed total net outflow of 50,000 crore in May, against a net inflow of 1.37-lakh crore in April. The main reason for the downtrend in the AUM can be attributed to the outflow of 46,724 crore in the liquid/money market category, against an inflow of 1.16-lakh crore in April.

Though SEBI has been advocating a reduction in commission for distributors, the recent sharp rise in the commissions paid to distributors has been worrying investors. In fact, the top 20 distributors, largely dominated by banks, managed 24 per cent of the 43-player mutual fund industry’s AUM as on March 2018.

The recent AMFI data showed that these distributors managed close to 5-lakh crore as of March, compared to 3.94-lakh crore handled in the same period last fiscal. The mutual fund industry commission payout to distributors was up 70 per cent at 8,500 crore in FY18.

Gold surges to Rs 31,570; silver slips below Rs 40K-mark

Gold prices surged by Rs 210 to Rs 31,570 per ten grams at the bullion market on firm global trend and increased buying by local jewellers. However, silver remained under selling pressure and slipped below the Rs 40,000-mark by plunging Rs 390 to Rs 39,910 per kg.

Traders said the domestic sentiment was bolstered, after gold prices rose to a one-week high in global markets, rebounding from a seven-month low touched in the previous session, as a softer US dollar stoked demand for the yellow metal. Besides, increased buying by local jewellers to meet retailers demand at the domestic spot market, supported the uptrend.

Globally, gold rose 0.32 per cent to $1,256.30 an ounce in Singapore. In the national capital, gold of 99.9 per cent and 99.5 per cent purity rebounded by Rs 210 each to Rs 31,570 and Rs 31,420 per ten grams, respectively. It had lost Rs 290 in the previous four days. Sovereign, however, remained flat at Rs 24,800 per piece of eight grams.

On the other hand, silver ready dropped further by Rs 390 to Rs 39,910 per kg, while weekly-based delivery recovered by Rs 315 to Rs 39,260 per kg on speculative buying. Silver coins, however, maintained a steady trend at Rs 75,000 for buying and Rs 76,000 for selling of 100 pieces.

Gold slips ahead of Fed minutes despite softer dollar

Gold drifted lower on Thursday despite a weaker dollar as investors worried that US Federal Reserve minutes would highlight the prospect of further rate hikes.

Spot gold was down 0.3 per cent at $1,252.15 an ounce by 0940 GMT. The metal touched a one-week high of $1,261.10 in the prior session and had gained over $20 from Tuesday’s low of $1,237.32, its weakest since December 12.

US gold futures for August delivery were little changed, up 0.03 per cent at $1,253.80 an ounce. The dollar index fell to its lowest level in more than a week while the euro climbed half a per cent to near three-week highs following strong German data.

“Gold is not making huge headway even though we’re in a slightly weaker dollar environment. The market is very much in a wait-and-see mode ahead of the Fed minutes,” said Jonathan Butler, commodities analyst at Mitsubishi in London.

The minutes of the US central bank’s June meeting are scheduled to be published at 2 p.m. EDT (1800 GMT).

During the discussion, the Fed had projected two more rate hikes in 2018 for a total of four. The minutes may point to concerns about inflation or that members want monetary policy to keep pace with fairly strong economic growth, Butler said.

“Those sorts of sentiments when they come out could weigh on gold and could give the dollar somewhat of a boost.”

Gold is highly sensitive to rising interest rates, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which the metal is priced. Investors are also awaiting the US ADP labour market report on Thursday and non-farm payrolls and unemployment data on Friday.

“One would not like to have any bullish bets on gold when the labour market trend is strong,” ThinkMarkets chief market analyst Naeem Aslam said.

Spot gold may retrace to support at $1,248 per ounce as it has failed to break resistance at $1,258, Reuters technicals analyst Wang Tao said. Among other precious metals, silver shed 0.8 percent to $15.92 an ounce. Palladium dipped 0.1 percent to $945 an ounce, while platinum edged up 0.1 percent at $840.50 an ounce.

YES Bank gets nod for MF biz

YES Bank on Wednesday announced it has received final approval from SEBI to start its mutual fund business. It has already received clearance from the RBI as well as in-principle approval from the markets regulator. “This will further complement YES Bank’s retail liabilities and wealth management strategy, and also allow YES Bank Asset Management Company (India) (YAMIL) to build on the Bank’s ‘DIGICAL’ distribution network to provide customers a seamless investment and banking experience,” said Rana Kapoor, MD & CEO, YES Bank.

The operational set up for YAMIL, including a robust technology architecture, partnerships for fund accounting and custodian services and registrar and transfer agent services, is already in place, an official release said, adding that a management team has also been recruited.

Yuan gains, China stocks grind after attempt to soothe markets

China’s yuan rose sharply against the dollar on Wednesday, a day after the central bank assured markets it would keep the currency stable amid heightened worries about trade frictions, although stocks remained under pressure.

Chinese currency and equity markets have been on tenterhooks ahead of July 6, when US tariffs on $34 billion worth of Chinese goods are set to kick in. Beijing has said it would retaliate with tariffs on US products.

The yuan had its worst month on record in June, losing about 3.3 per cent of its value against the greenback, and the slide continued on Monday, the first trading day of July.

On Tuesday, though, the yuan had rebounded after People’s Bank of China Governor Yi Gang’s remarks and continued to ride the updraft on Wednesday, putting it on track for its first two-day winning streak since the middle of June.

At 0341 GMT, it was trading at 6.6305 yuan per dollar, 0.2 per cent stronger than the late night close on Tuesday.

“Thankfully for regional risk, the PBOC engaged the yuan airbrake yesterday afternoon and at least for the time being, with the help of Chinese state-owned banks who were seen selling dollars to prop up the Chinese currency, is restoring a sense of calm in regional markets,” OANDA wrote in a note.

A trader at a Chinese bank said the PBOC’s signal was clear, but the market would closely watch and react to developments ahead of July 6.

“In the short term, the yuan will continue consolidating at the current level, while sharp, one-way falling might have come to an end,” the trader said.

Key Chinese equity indexes were less enthusiastic, flip-flopping for part of the morning around Tuesday’s closing prices before ending the session in negative territory.

The benchmark CSI300 Index was down 0.85 per cent by the lunch break, and the Shanghai Composite Index was off 0.68 per cent. At 0345 GMT, Hong Kong’s Hang Seng Index was down more than 1 per cent, while an index that tracks mainland companies had fallen about 1.5 per cent.

China stocks mixed, yuan slips as RRR cut takes effect

Chinese stocks were mixed in early trading on Thursday and the yuan gave back some of its recent gains against the dollar as a targeted cut of reserve requirements for banks took effect and amid heightened China-US trade tensions.

Markets are on edge ahead of Friday, when US tariffs on $34 billion worth of Chinese products – and retaliatory Chinese tariffs on US goods of the same value – are expected to kick in. At 0204 GMT, the yuan was trading at 6.6357 per dollar after ending the late night session at 6.6330.

The blue chip CSI300 Index was up around 0.2 per cent, but the Shanghai Composite Index was down 0.1 per cent. Hong Kong’s Hang Seng Index was also down, about 0.2 per cent. The reserve requirement cut, which was announced on June 24, releases about 700 billion yuan in liquidity, the People’s Bank of China said on Thursday.

Rupee loses 19 paise to end at 68.93 against US dollar

The rupee ended 19 paise lower at 68.93 on Thursday.

The rupee opened 5 paise lower at 68.79 and traded between 69 and 68.69 in intra-day trade.

Increased demand for the American currency from importers and banks amid persistent foreign fund outflows and lower equities weighed on the rupee.

Foreign portfolio investors (FPIs) sold shares worth Rs 284.58 crore yesterday, as per provisional data. Forex dealers said the rise of euro and yen against the greenback capped the rupee’s fall.

Yesterday, the rupee had lost 17 paise at 68.74 against the dollar amid rising crude oil prices and inflationary concerns after MSP hike for kharif crops by the government.

Weakening of rupee not a cause of worry: Niti Aayog VC

Niti Aayog Vice-Chairman Rajiv Kumar today said the weakening of the rupee is not a cause of worry as it is still overvalued in terms of the Real Effective Exchange Rate (REER). The rupee is hovering around a low of 69 per dollar due to multiple headwinds, including concerns over inflation and weak global cues.

During the UPA-II regime in 2013, the rupee had weakened from 57 to 68 a dollar in three months, and hence the comparison would be misplaced, Kumar said in a press conference on initiatives taken by the Niti Aayog. He was responding to criticism of the government on the issue of handling of the rupee.

“Rupee is overvalued in terms of REER. There is no reason to worry…RBI has maintained that it will not interfere to keep the rupee at any particular level,” Kumar said.

On the issue of the takeover of IDBI Bank by LIC, Kumar said: “LIC will make very good money by investing in IDBI. I see IDBI Bank’s turnaround soon and improvement in its market capital.”

He further said the economy is likely to grow at 7.5 per cent in 2018-19, and in 2019-20, it may grow at 8 per cent. “By 2022, the country will start growing at 8.5 per cent, and thereafter it will sustain it,” he said.

The Niti Aayog Vice-Chairman said no other government in the past has taken as many reforms as the Modi-led NDA government has taken in the last four years. He also noted that there has been ample employment generation in the last four years in the country. Replying to a query on disinvestment of Air India, Kumar said: “The government is considering the whole issue afresh.”

Major currencies in suspense before Sino-US tariff deadline

Major currencies were on tenterhooks on Thursday on the eve of Washington’s deadline to impose tariffs on Chinese imports while the yuan held steady after the central bank this week sought to stem its recent tumble.

The euro stood little changed at $1.1661, having found firm support near $1.15 over the past few weeks despite worries about an economic slowdown and political instability in Europe. The dollar traded at 110.48 yen, off a five-week high of 111.14 on Friday.

The offshore yuan fetched 6.6350 per dollar, keeping some distance from Tuesday’s 11-month low of 6.7344, following reassuring remarks from Yi Gang, governor of the People’s Bank of China. “Chinese authorities had initially appeared to approve fall in the yuan to support the economy ahead of a possible start of US tariffs,” Minori Uchida, chief currency strategist at MUFG Bank. “But then there’s a memory of massive capital outflows in 2016, which wiped out a quarter of their foreign reserves. So I would think they felt they needed to stem the yuan’s fall. Given that, the yuan may stay firm for now,” he said.

Yet market players are nervous as they braced for a full-scale Sino-US trade war. Washington has said it would implement tariffs on $34 billion of Chinese imports on July 6, and Beijing has vowed to retaliate in kind on the same day.

China’s finance ministry, however, said on Wednesday Beijing will “absolutely not” fire the first shot in a trade war with the United States and will not be the first to levy tariffs. As investors tried to hedge against further gyrations in the yuan, the implied volatility of one-week dollar/yuan options has risen to a five-month high of 7.350 per cent.

That was above the implied volatilities of the euro/dollar, which stood at 6.675 per cent, for the first time ever. The yen’s one-week volatility was quoted at 6.925 per cent, also the first time since late 2015 it traded below volatility in the yuan.

Because of Beijing’s control, the yuan’s implied volatility had long stayed below that of major free-float currencies such as the euro and the yen. The British pound held firm at $1.3221 after a survey on Wednesday showing Britain’s dominant services industry gained momentum last month fuelled expectations of a Bank of England interest rate rise this summer.

The Canadian dollar also held near three-week high, helped by rise in oil prices. The loonie stood at C$1.3146 to the dollar, after having risen to C$1.3113 on Wednesday, its highest since mid-June.

The index of the US dollar against six other major rivals was at 94.539, having slipped to 94.397 on Wednesday, its lowest level in over a week. While the dollar has been supported by the perception of the relative strength of the US economic growth and the attraction of its higher bond yields, some market players say recent falls in US bond yields may be undermining the dollar.