Oil was down Monday morning in Asia but remained little changed even as increasing numbers of COVID-19 cases globally continue to cloud the fuel demand outlook.
Brent oil futures fell 1.16% to $72.59 by 1:31 AM ET (5:31 AM GMT) after rolling over to the Oct. 21 contract on Jul. 25, 2021. WTI futures slid 1.25% to $71.17.
“We saw an overreaction in the market last Monday, and like all other technical corrections so far oil’s downturn has typically proven short lived… bargain hunters came in droves when Brent got below $70 and the economic demand for energy looks robust,” OCBC Bank economist Howie Lee told CNBC.
However, rising numbers of COVID-19 cases involving the Delta variant have prompted countries such as Thailand and Vietnam to impose curfews, while the possibility of tougher restrictions for those unvaccinated has been floated in Germany.
U.S. White House medical advisor Anthony Fauci also warned that the nation is moving in the “wrong direction” in dealing with its latest wave of COVID-19 cases.
European stock markets are expected to open lower Monday, after a negative lead from Asia that reflected dismay at China’s latest move against technology companies.
At 2:05 AM ET (0605 GMT), the DAX futures contract in Germany traded 0.4% lower, CAC 40 futures in France dropped 0.4% and the FTSE 100 futures contract in the U.K. fell 0.4%.
European markets have had a negative handover from Asia Monday after the Chinese government continued its regulatory clampdown, releasing plans over the weekend to reform the $100 billion education sector, one of the country’s most desired investment plays in recent years.
Attention for much of this week is likely to turn further west, with the Federal Reserve, set to hold a two-day policy meeting, concluding on Wednesday, which could see the U.S. central bank announcing when it plans to start scaling back its hefty asset-purchasing program.
Additionally, this week is scheduled to be one of the busiest for earnings reports, with Tesla (NASDAQ:TSLA) due after the close Monday, and then the big tech giants Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) on Tuesday, while Facebook (NASDAQ:FB) and Amazon (NASDAQ:AMZN) report later in the week.
The dollar edged lower in early European trading Monday, but remained at elevated levels ahead of this week’s important policy meeting by the U.S. Federal Reserve.
At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 92.885, just below the 3 1/2-month high of 93.194 seen last week.
USD/JPY fell 0.2% to 110.34, GBP/USD edged lower to 1.3741, EUR/USD gained 0.1% to 1.1778, while the risk-sensitive AUD/USD fell 0.2% to 0.7348.
This week’s key event is the two-day meeting of the Federal Reserve, concluding on Wednesday. There isn’t expected to be a change in policy at this meeting, but the central bank could provide more clarity over when it will start to taper its massive bond-buying program, in the light of above-trend economic growth and inflation.
“While it may not specify exactly when it is ready to taper, the tone should generally support the view that tapering should emerge in 4Q this year, with the possibility of a first hike coming in 4Q22,” said analysts at ING, in a research note.
There are also a number of important U.S. data releases due this week that should illustrate the economy’s strong performance. In particular, the second-quarter gross domestic product is forecast on Thursday to show annualized growth of 8.6%, a sharp jump from 6.4% in the previous quarter.
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