Gold soars on Hong Kong unrest, Argentina peso rout

Spot gold was up 1 percent at $1,525.99 per ounce hit a high of $1,534.31 — its highest level since April 2013. (REUTERS)
Updated 13 August 2019

Gold soars on Hong Kong unrest, Argentina peso rout

  • Spot gold was up 1 percent at $1,525.99 per ounce hit a high of $1,534.31 — its highest level since April 2013

BENGALURU: Gold hit a more than six-year high on Tuesday as unrest in Hong Kong and a rout in the Argentine peso drove investors already spooked by the US-China trade war into havens such as bullion at the expense of riskier assets such as stocks.
Spot gold was up 1 percent at $1,525.99 per ounce hit a high of $1,534.31 — its highest level since April 2013.
US gold futures was up by 1.3 percent to $1,537 an ounce.
“Bond yields and equities are down which are the main reason for gold to be higher. There is a bit of safe-haven (interest),” ABN Amro analyst Georgette Boele said. “People are nervous about Hong Kong again.”

 

Share markets slid for a third day on Tuesday as investors were spooked by fears of a drawn-out global trade war, the Hong Kong protests and a crash in the peso.
In Hong Kong, pro-democracy protesters on Monday shut down the city’s airport, the world’s busiest air cargo hub.
Elsewhere, Argentina’s peso collapsed on Monday, losing roughly 15 percent of its value against dollar after crumbling to an all-time low.
Fears of a possible return to interventionist policies of the previous government have gripped the Argentine market since market-friendly President Mauricio Macri lost a primary election by a bigger-than-expected margin.
The yen rose to a seven-month high against the dollar in the previous session, while US 30-year bond yields extended Monday’s losses to slip to their lowest since July 2016.

Decoder

Gold bullion, along with the Japanese yen and US Treasuries, are seen as a relatively safe investment in times of political and financial uncertainty.


Asia jet fuel demand slumps after flights canceled over outbreak

Updated 35 min 25 sec ago

Asia jet fuel demand slumps after flights canceled over outbreak

  • Jet fuel demand could fall by 170,000 bpd in 2020

SINGAPORE: Asian jet fuel demand is taking a beating from an outbreak of a flu-like virus in China that has led airlines to cancel scores of flights during the peak lunar new year travel season.

Jet fuel prices have dropped and refiners’ profits for the product have slumped to the lowest in more than two and a half years, while industry analysts are cutting their 2020 forecasts for jet fuel and overall oil demand.

Airlines and passengers are on guard against the respiratory coronavirus that originated in the central Chinese city of Wuhan, killing more than 130 people in China so far and spreading to over a dozen countries.

“Chinese jet demand usually sees a seasonal upside of around 150,000 barrels per day (bpd) ahead of the lunar new year in January versus December, and we are likely to be looking at a lower-than-average seasonal uptick for early 2020 given the curtailments on travel,” said Kostantsa Rangelova, lead Asia analyst at Vienna-based consultancy JBC Energy.

Many passengers have called off travel plans for the lunar new year holiday, prompting airlines to offer refunds.

“Market participants, already wary of slow demand growth from last year, are weighing the effects on global oil demand of the lockdown in several cities in China, and likely reduced traveling in the broader Asia-Pacific region,” Barclays analyst Amarpreet Singh said in a note.

During the 2002-2003 outbreak of severe acute respiratory syndrome (SARS) — also caused by a coronavirus that originated in China and which killed nearly 800 people globally — air passenger demand in Asia plunged 45 percent. And now, the travel industry is more reliant on Chinese travelers, and China’s share of the global economy has quadrupled.

“This year, the impact on jet fuel could be more severe, as China’s share of global jet demand has risen from 3.8 percent in 2003 to 12 percent in 2017,” Citi analysts led by Ed Morse said in a note.

If air passenger traffic in China were to decline by half in the first quarter of this year, it would likely lead to a 300,000 barrels-per-day (bpd) decline in jet kerosene demand from China from a year ago, Barclays analyst Singh said.

Several airlines across Asia have suspended flights to Wuhan, and some tour operators are canceling trips to China.

“Flight departures from the top five biggest Chinese airports fell by nearly 800 flights this past weekend relative to (the previous) weekend, while traffic in the five airports closest to Wuhan have fallen by nearly 50 percent over recent days,” analysts at RBC Capital Markets said in a note.

Jet fuel demand over the past five years has been a bright spot for global oil demand growth, accounting for some 15 percent of Chinese demand growth, the analysts said.

Refiners’ profits for producing a barrel of jet fuel from Dubai crude fell to $9.25 a barrel on Monday, the lowest level since June 2017 and down nearly 40 percent since the start of this year, Refinitiv Eikon data showed.