Tech trends intact
OPEC and the Russian-led coalition of other oil-producing countries (OPEC+) decided in an online meeting yesterday to extend the current production agreements through April. The oil market reacted enthusiastically to the decision. A barrel of West Texas oil traded at a price of 63.83 dollars and thus rose by 4.2 percent to the highest level in almost two years.
An exception was made for Russia and Kazakhstan due to seasonal influences. It has been agreed that production may be increased by 130,000 and 20,000 barrels per day respectively. Furthermore, Saudi Arabia has voluntarily extended its production cut of 1 million barrels per day until April.
The extension of the lockdown measures in Europe in particular is creating uncertainty about recovery demand in the oil market. In addition, the United States with its new President Joe Biden is willing to cooperate on the nuclear agreement with Iran. In exchange, the United States would have to lower sanctions. This implicitly means an increase in oil production by Iran.
During the opening of the annual Chinese National People’s Congress, Premier Li Keqiang reported that the economy is expected to grow by more than 6 percent this year and that an estimated 11 million new jobs will be created.
The growth forecast was considerably lower than the more than 8 percent economists had expected. This year, the economy is expected to recover further from the corona crisis.
Furthermore, the Chinese Premier announced that spending on research and development will increase by more than 7 percent annually over the next five years. Innovations in the field of chips, operating systems, processors, and cloud computing are spearheads for China to become less dependent on foreign countries. Priority is given to the construction of 5G networks for super-fast internet.
China’s spearheads confirm once again that technological trends remain intact.
Last week, Fed Chairman Jerome Powell was still able to calm the financial markets by emphasising that rising interest rates reflected confidence in economic recovery. Yesterday, during a Wall Street Journal event, Powell indicated that the stimulus measures will temporarily increase inflation. Should this tighten financial conditions on the capital markets, the central bank is ready to intervene.
These words did not go down well with investors. The yield on ten-year US government bonds shot up to 1.58%. As a result, tech stocks in particular were sold off. The Nasdaq closed 2.1 percent lower and thus lost the entire year’s profit.
The attention of investors today is focused on the results of the U.S. jobs report. The developments in the labour market and the inflation expectations are decisive for the monetary policy of the central bank.