【Market Evening】Oil plunges to 2-week low, Asian markets pull back, Natural gas trends lower
Euro hovers ahead of ECB meeting, yen looks past BOJ doves; Oil plunges to 2-week low on U.S. inventory shock, rise in COVID-19 cases; Gold firms as U.S. bond yields, dollar weaken.

Gold firms as U.S. bond yields, dollar weaken
Gold prices consolidated at the key $1,800 level on Thursday, supported by softer U.S. bond yields and dollar as investors focused on how central banks respond to rising price pressures.
Spot gold price fell 0.01% to $1796.01 per ounce and spot silver fell 0.069% to $24.02 per ounce by 17:30(GMT+8).
Benchmark 10-year U.S. Treasury yields steadied close to a two-week trough, decreasing the opportunity cost of holding non-yielding bullion.
Adding to gold’s support, the US dollar index fell 0.1%. A weaker dollar makes greenback-denominated gold cheaper for holders of other currencies.
“We’re seeing some more buyers being drawn into the gold market and that’s partly around the narrative of higher prices,” said Nicholas Frappell, global general manager at ABC Bullion.
Investors now await the European Central Bank (ECB) policy meeting due later in the day, followed by the U.S. Federal Reserve meeting on Nov. 3.
Market participants also took stock of the Bank of Japan retaining its easy monetary policy and projecting inflation at well below its target for at least the next two years.
Gold is often considered an inflation hedge, though reduced stimulus and interest rate hikes push government bond yields up, denting gold’s appeal.
“Gold’s supportive backdrop is waning as the Fed is getting closer to a tapering decision from November and rate hikes from mid-2022,” ANZ analysts said in a note.
“Negative real yield and inflation risks will help prices to move to $1,850/oz before retreating next year and beyond.”
Demand for gold fell in the third quarter to its lowest since the last quarter of 2020, the World Gold Council (WGC) said.
WGC, however, expects physical demand in large consumer India to strengthen in the fourth quarter.
“Physical demand is pretty good but gold’s support will likely be much more contingent on the degree and strength of investor demand,” ABC Bullion’s Frappell said.
Euro hovers ahead of ECB meeting, yen looks past BOJ doves
The euro dipped below $1.16 ahead of the European Central Bank meeting on Thursday as investors wait to hear policymakers' views on the outlook for inflation and an expected push back against rising interest rate projections.
On a busy day for central bank-driven activity, the Australian dollar dipped on growing speculation about the Reserve Bank of Australia's tightening plans while the yen was unruffled after the Bank of Japan stuck with its dovish stance.
Analysts expect the ECB to push back against growing expectations for a rate hike next year, even though it may admit that inflation will be higher than projected. Euro zone inflation expectations are also soaring, with one market gauge hitting a seven-year high this month.
The euro was down marginally at $1.1599, The dollar index was little changed at 93.863.
"Most in the market probably expect some kind of pushback against the market pricing of 2022 ECB tightening, where a 10bp rate hike is now priced for next September. This all seems a little obvious and perhaps a reason for EUR/USD not to sell-off were Lagarde to deliver," ING analysts said in a note.
The Japanese yen nudged slightly higher to 113.74 per dollar but remained close to four-year lows.
The BoJ cut its consumer inflation forecast for the year ending in March 2022 to 0% from 0.6% and as expected the overall takeaway reinforced market bets it will lag other central banks in dialling back crisis-mode policies.
The Australian dollar dipped 0.1% to $0.7516, near its three-month top as Australian bond yields surged to their highest since mid 2019 after the central bank declined to buy a government bond at the heart of its stimulus programme, even though yields were well above its target of 0.1%.
The yield target is central to the RBA's case that the 0.1% cash rate will not rise until 2024, so any failure to maintain it fuels market wagers that rates will have to rise much earlier, perhaps even by mid-2022.
The Aussie initially fell 0.5% after the RBA statement but soon erased those losses.
"For the first time in what has felt for a long time currencies are really driven by interest rate differentials, as central banks start to telegraph where they are in their normalisation cycles," said Kim Mundy, senior economist and currency strategist at Commonwealth Bank of Australia.
The Bank of Canada signalled on Wednesday it could hike interest rates as soon as April 2022 and said inflation would stay above target through much of next year, due to higher energy prices and supply bottlenecks.
The U.S. dollar fell against the Canadian dollar on the news and was last at $C1.2367, leaving the loonie close to a four-month high.
Oil plunges to 2-week low on U.S. inventory shock, rise in COVID-19 cases
Crude oil prices slumped to their lowest in two weeks after official figures showed a surprise jump in U.S. inventories of crude, and rising cases of COVID-19 in Europe, Russia, and some outbreaks of infections in China dented hopes for an economic recovery.
Brent crude oil price fell 0.52% to $82.83 a barrel while U.S. West Texas Intermediate crude oil price was at $81.29 a barrel, down 0.42% by 17:30(GMT+8).
Outbreaks of coronavirus infections in China and record deaths and the threat of lockdowns in Russia, along with rising cases in western Europe were putting the brakes on a multi-week rally in oil prices.
"A surge in new cases of COVID-19 threatens to disrupt the recovery in oil demand," ANZ Research commodities strategists Daniel Hynes and Soni Kumari said in a new report on Thursday.
In the U.S., the economy likely grew at the slowest rate in more than twelve months in the June-September quarter amid a resurgence of COVID-19 infections, amid strained global supply chains and global shortages of goods like autos.
Crude oil stocks rose by 4.3 million barrels last week, the U.S. Energy Department said, more than double the 1.9 million-barrel gain forecast by analysts.
The "hefty" stock build came "on the back of a large jump in net imports of crude oil and still sluggish refinery processing," Citi Research commodities analysts said in a note.
Still, gasoline stocks fell by 2 million barrels to the lowest in nearly four years, even as U.S. consumers struggle with rising prices to fill their tanks. [EIA/S]
At the WTI delivery hub in Cushing, Oklahoma, crude storage is the most depleted in three years, with prices for longer-dated futures contracts indicating supplies will stay low for months.
Natural gas prices to trend lower as Russia will increase the supply of natural gas to Europe
Russian President Vladimir Putin said on Wednesday that once the domestic gas reserves are full, Gazprom will fill the gas reserves in Germany and Austria.
This additional supply is likely to drive the natural gas prices to decrease. The CEO of the company said that the end time of domestic natural gas injection is one week longer than originally scheduled on November 1. The company has only injected a very small amount of natural gas into its European storage facilities so far. The supply of natural gas in the European market is worrisome as Russia focuses on restoring domestic natural gas storage, coupled with the low inventory of some of the company's sites in the European Union.
Asian markets pull back, chilled by decline on Wall Street
Asian shares fell Thursday after a retreat on Wall Street as banks and health care companies pulled the S&P 500 and the Dow Jones Industrial Average back from their latest record highs.
Nikkei 225 fell 0.96% to 28,820.09.
Hang Seng Index fell 0.28% to 25,555.73.
Taiwan capitalization weighted stock fell 0.19% to 17,041.63.
S&P/ASX 200 fell 0.25% to 7,430.40.
South Korea KOSPI fell 0.53% to 3,009.55.
Samsung’s dual strength in parts and finished products has allowed it to flourish during the pandemic as millions of people were forced to work at home. However, the company said it was dealing with “longer-than-expected” component shortages that may affect the demand for semiconductors during the current quarter.
Flaring cases of coronavirus in China and Singapore were adding to a general unease over the economic outlook, given signs that inflationary trends might lead central banks to move faster to tighten monetary policy.
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