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What’s happening: Oil prices climbed almost 2% on Monday, to reach a three-month high.
What happened: Crude prices were supported by tightening supply and expectations of stimulus measures by the Chinese government.
Oil prices rose on Monday despite speculations of rate hikes by the US Federal Reserve and the European Central Bank.
Why it matters: Both WTI and Brent have risen for four weeks in a row on expectations of tighter global supplies due to production cuts by the Organization of the Petroleum Exporting Countries and allies (OPEC+).
Both crude benchmarks extended gains on Monday, and entered technically overbought territory, on speculations of announced supply cuts by the OPEC+ resulting in sizable deficits in the second half of the year.
Markets shrugged off concerns related to the Federal Reserve’s two-day rate meeting, which is scheduled to begin today. Given cooler inflation and upgrades to economic growth forecasts, the US central bank is widely expected to increase interest rates by 25 basis points. Higher interest rates have a dampening impact on economic growth, which reduces oil demand.
Crude markets made steep gains on expectations of stimulus by China’s government, given the loss of momentum in the economy. China’s headline GDP growth slowed to 0.8% in the second quarter, decelerating significantly from the 2.2% growth recorded in the previous quarter. The latest new homes sales, retail sales and PMI figures remained soft, fuelling speculations of government intervention.
Against this backdrop, Politburo (the ruling Communist Party’s top decision-making body) assured the rollout of more measures to support the economy in the coming months. The news fanned hopes of a stronger economic recovery by China leading to higher oil demand from the world’s largest importer.
WTI crude oil for September delivery rose $1.67 to settle at $78.74 a barrel on Monday. Brent crude for September delivery climbed to $82.74 per barrel.
In other energy trading, wholesale gasoline for August delivery added 9 cents to reach $2.90 a gallon, while August heating oil rose 2 cents to $2.77 a gallon and August natural gas fell 3 cents to $2.69 per 1,000 cubic feet.
What to watch: Investors will watch US crude inventory data, scheduled for release later today. US crude stockpiles had contracted by 0.797 million barrels in the week ended July 14. Markets also await the Federal Reserve’s rate decision tomorrow.
Context: Shares of NXP Semiconductors climbed in after-hours trading on Monday, following the company’s second-quarter report.
Details: The semiconductor sector has been in focus, with some of the largest companies investing billions of dollars in developing artificial intelligence (AI) for a wide range of applications.
NXP Semiconductors, which is a leading supplier of chips to the automotive industry, reported a 2.56% year-on-year decline in its quarterly earnings to $3.43 per share. However, the figure topped the consensus estimate of $3.27 per share.
The Dutch semiconductor manufacturer’s quarterly sales contracted by 0.33% to $3.30 billion but came in higher than the consensus estimates of $3.21 billion.
NXP Semiconductors said its automotive revenues climb 9% in the second quarter to $1.87 billion.
Management issued upbeat guidance, projecting total revenues between $3.3 billion and $3.5 billion, versus the consensus estimate of $3.31 billion. The company also guided to earnings between $3.39 per share and $3.82 per share, versus Wall Street expectations of $3.43 per share.
The Nasdaq-listed shares of NXP Semiconductors climbed 1.95% to $215.00 in after-hours trading on Monday. The stock has added more than 36% year to date.
What are expectations: Traders await the company earnings call later today, during which management will provide more details of the second-quarter results. Markets also look forward to the company’s outlook for the year and the Q&A session with analysts.
Other Markets: European indices closed mostly higher on Monday, with the FTSE 100, DAX 40, FTSE MIB and STOXX Europe 600 Index up by 0.19%, 0.08%, 0.18% and 0.06%, respectively. The CAC 40 bucked the trend and closed lower by 0.07%.
Russia accused Ukraine of two attempted drone attacks on Moscow, which were detected and destroyed in the early hours of the morning. The news sent the safe-haven US dollar index slightly lower this morning.
Mexico’s annual inflation rate eased to 6.76% in the first two weeks of July, broadly in-line with expectations of 6.73%. The figure being the lowest since March 2022 supported the MXN/USD forex pair.
Chile’s producer prices fell for fifth consecutive month by 9.5% year-on-year in June. Although this was the steepest decline since August 2012, the CLP/USD pair fell in forex trading this morning.
South Korea’s economy expanded by 0.6% in the second quarter, accelerating from the previous quarter’s 0.3% growth. The figure also came in higher than market expectations of a 0.5% expansion, lending support to the KRW/USD forex pair.
The US S&P Global Manufacturing PMI improved to 49 in July, from a six-month low of 46.3 in the prior month. The figure was also better than forecasts of 46.2 and sent the three major equity indices higher on Monday.
UK’s inflation rate, PPI input and output, retail price index and industrial trends orders, Eurozone’s construction output, Italy’s current account and construction output, Germany’s 30-year bund auction, Turkey’s MPC meeting summary, Canada’s inflation rate, Brazil’s business confidence and interest rate, US gasoline stocks change, Argentina’s leading indicator, unemployment rate and GDP growth, and South Korea’s PPI.
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