Markets

• Hong Kong stocks led gains among Asian equities ahead of US jobs data that will identify the path ahead for interest rates.
• Nikkei Index +0.2%; Shanghai Index na; Hang Seng Index +1.8%
  • Equities in Japan and South Korea advanced while stocks in Australia dropped
  • Markets in mainland China were shut for a holiday
  • A gauge of Chinese shares in Hong Kong advanced as traders assessed its recent rally’s sustainability and await details of fiscal stimulus and holiday spending
  • Japan’s Prime Minister Shigeru Ishiba instructed his cabinet on Friday to draw up a package of economic measures in a show of support to inflation-hit voters ahead of a general election
• S&P 500 Index -0.2%; Nasdaq Index -0.0% yesterday
  • Amid all the geopolitical uncertainty, investors are looking for further signals on the health of the US economy, with the monthly payrolls report due on Friday
    • The unemployment rate is forecast to hold steady at 4.2% in September while payrolls are expected to rise by 150,000
  • The Institute for Supply Management’s index of services posted its best reading since February 2023, ahead of Wall Street estimates
  • Applications for US unemployment benefits rose slightly last week to a level that is consistent with a limited number of layoffs

Commodities

• Brent for December is down USD 0.1/b at USD 77.5/b this morning after increasing by USD 3.7/b the last trading day
  • Oil prices were little changed on Friday, but remained on track for strong weekly gains, as investors weighed the prospect of a wider Middle East conflict disrupting crude flows against an amply supplied global market
  • Earlier gains came after puzzling comments from President Joe Biden, who told reporters the US was discussing whether to support potential Israeli strikes against Iranian oil facilities
  • While the region accounts for more than a third of the world’s oil supply, a direct attack on Iran’s oil facilities seems the least likely response among Israel’s options
    • As of 2023, Iran holds a significant position in global oil production, contributing about 3.7m bpd. This accounts for approximately 4% of the world’s total oil production
    • Iran exports roughly 1.7m b/d of crude oil, so the potential impact is meaningful
  • Meanwhile Israel’s military hit Beirut with new airstrikes in its battle against Lebanese armed group Hezbollah
  • A Reuters survey on Thursday shows September oil production from OPEC dropping to its lowest point this year, at 26.14m b/d, down nearly 400,000 bpd from the previous month, primarily due to disruptions in Libya which have been resolved now
• Dutch TTF nat. gas price increased by 3% and UK NBP nat. gas price increased by 5% the last trading day
• Key notes from the latest weekly Profercy reports:
  • The escalation of tensions in the Middle East ahead of the 3 October RCF India  tender saw suppliers revise price ideas quickly this week.
  • Derivatives values surged 1-2 October with physical offers lifted in many regions. Physical business has also taken place at higher levels in North Africa and in the US Gulf. Major sales have not been concluded, but this has been influenced as much by supplier reluctance to sell as it is by buyer caution.
  • The advance presents challenges for India in the latest purchasing tender for shipments to 20 November. Against the backdrop of China’s absence from the market, the potential risk of disruption to Middle East shipments has raised the stakes.
  • Indeed, the largest state-backed importer of urea has been increasingly reliant on Middle East supply. Notably, over 70% of shipments nominated to date under the earlier NFL tender are basis shipment from the region.
  • With August and September sales strong, India is expected to be targeting at least two million tonnes through multiple tenders for shipments into January. No supply disruption has been evident yet, but the risk is there.
  • In the latest inquiry, 21 companies have offered with volumes on paper over 2.5m. tonnes. This will include significant double counting, as well as uncompetitive offers.
  • Price bids are awaited with these due in the coming days or early next week. Early this week, values either side of $370pt cfr west coast had been considered reasonable.
• For ammonia market:
  • The settlement of the Tampa contract for October at a $30pt premium to last month faile to kick-start the market. Instead, worries about the potential for serious disruption to Middle East supply chains should the regional conflict escalate were the focus of attention.
  • While Iranian material only represents about 3% of the merchant market, the risk to loadings in other parts of the Arab Gulf has generated plenty of concerns. For now, it is business as usual, although the situation has created some upward price pressure East of Suez.