I want to begin with a quote from a recent Cornerstone Macro report that succinctly summarizes the research firm’s view on growth prospects in emerging markets and China specifically. Emphasis is my own:
Our most out-of-consensus call this year is the belief that China, and by extension many emerging markets, will see a cyclical recovery in 2016. We understand the bearish case for emerging markets on a multiyear basis quite well, but we also recognize that in a given year, any stock, sector or region can have a cyclical rebound if the conditions are right. In fact, we’ve already seen leading indicators of economic activity and earnings perk up in 2016 as PMIs have rebounded in many areas of the world. That is all it takes for markets, from equities to CDS, to respond more favorably as overly pessimistic views get rerated. And like in most cyclical recoveries that take place in a regime of structural headwinds, we don’t expect it to last beyond a few quarters.
There’s a lot to unpack here, but I’ll say upfront that Cornerstone’s analysis is directly in line with our own, especially where the purchasing managers’ index (PMI) is concerned. China’s March PMI reading, at 49.7, was not only at its highest since February 2015 but it also crossed above its three-month moving average—a clear bullish signal, as I explained in-depth in January.
I spend a lot of time talking about the PMI as a forward-looking indicator of commodity prices and economic activity. As money managers, we find it to be far superior to GDP in forecasting market conditions three and six months out. In the past I’ve likened it to the high beams on your car.
We were one of the earliest shops to make the connection between PMIs and future conditions, and we continue to be validated. Just this week, J.P.Morgan admitted that “stocks are taking their cues from the monthly PMIs,” the manufacturing surveys in particular, as opposed to GDP.
We eagerly await China’s April PMI reading and are optimistic that this cyclical recovery has legs.
Cornerstone’s outlook is supported by a recent study conducted by CLSA, which found that 73 percent of “Mr. and Mrs. China” expect to be better off three years from now, while only 3 percent expect to be worse off:
Optimism is strongest among those in higher-tier cities, reflecting the disparity in economic vibrancy across tiers: as many as 80 percent of families in first-tier cities have optimistic outlook. The figure is lower, albeit still strong, at 68 percent among families in the third tier.
More than half of those surveyed said they expected to be driving a nicer car and living in a bigger home in the next few years, which is a boon for materials and metals such as platinum and palladium, used in catalytic converters.
As a reflection of growing demand for new homes, house prices in China are climbing right now in first-tier and, to a lesser extent, lower-tier cities, a sign that more and more citizens are seeking the “Chinese dream.”
China’s Insatiable Appetite for Metals
China’s appetite for metals—gold, silver, copper, iron ore and more—is growing, another sign that the Asian giant is in turnaround mode.
China is the world’s largest importer, consumer and producer of gold. Last year, physical delivery from the Shanghai Gold Exchange (SGE) reached a record number of tonnes, more than 90 percent of total global output for 2015. Meanwhile, the People’s Bank of China continues to add to its reserves nearly every month and is now the sixth largest holder of gold—the fifth largest if we don’t include the International Monetary Fund (IMF). As of this month, the bank holds 1,788 tonnes (63 million ounces) of the yellow metal, which amounts to only 2.2 percent of its total foreign reserves, according to calculations by the World Gold Council.
Now, in a move that’s sure to boost China’s financial clout in global financial markets even more, the country just introduced a new fix price for gold, one that is denominated in Chinese renminbi (also known as the yuan).
Gold is currently priced in U.S. dollars. That’s been the case for a century. But since gold demand has been shifting from West to East, China has desired a larger role in pricing the metal. The Shanghai fix price is designed with that goal in mind.
It’s unlikely that Shanghai will usurp New York and London prices any time soon, but over time it will allow China to exert greater control over the price of the commodity it consumes in vaster quantities than any other country.
China’s gold consumption isn’t the only thing turning heads. I shared with you earlier this week that the country imported 39 percent more copper in March than in the same month last year. (Shipments also rose 18.7 percent in renminbi terms in March year-over-year.)
The heightened copper demand has fueled renewed optimisim in the red metal. Prices are up 6 percent month-to-date.
Caixin reports that China’s iron ore imports are surging on lower prices. In the first two months of 2016, the country purchased 86 percent more iron than it needs. What’s more, total imports were up 84 percent from the same time last year.
Steel production, which requires iron ore, is likewise ramping up. Output is currently at 70.65 million tonnes, an increase of nearly 3 percent year-over-year.
For reasons unknown, China has also been growing its silver inventories pretty substantially for the past six months, according to an article shared on Zero Hedge. This month, as of April 19, the Shanghai Futures Exchange added a massive 1,706 tonnes, which is a 452 percent increase from the amount it added in April 2015. Shanghai silver inventories are now at thier highest level ever.
Though unconfirmed, it’s possible this silver will eventually be used in the production of solar panels, every one of which uses between 15 and 20 grams of the white metal. China is already the world’s largest market for solar energy—it surpassed Germany at the end of last year—with 43.2 gigawatts (GW) of capacity. (By comparison, the U.S. currently has 27.8 GW.) But get this: It plans on adding an additional 143 GW by 2020, which will require a biblical amount of silver.
Not to be outdone, India also plans significant expansion to its solar capacity, with a goal of 100 GW by 2022, according to the Indian government.
Metals Still Have Room to Rock
We know that money supply growth can lead to a rise in commodity prices. Note that Chinese money supply peaked in 2010 and has since fallen, along with commodity prices.
New bank loans in China have spiked dramatically this year while money supply has grown more than 13 percent year-over-year, which is good for metals and manufacturing.
The increase in metals demand, not to mention the weakening of the U.S. dollar, has allowed silver to become the top performing commodity of 2016 after overtaking gold.
Despite the rally, gold doesn’t appear to be overbought at this point, based on an oscillator of the last 10 years. We use the 20-day oscillator to gauge an asset’s short-term sentiment. When the reading crosses above two standard deviations, it’s usually considered time to sell. Conversely, when it crosses below negative two standard deviations, it might be a good idea to buy.
Silver is currently sitting at 1.2 standard deviations, suggesting a minor correction at this point would be normal.
Time to Take Profits in Oil?
The same could be said about Brent oil, which has returned 61 percent since hitting a recent low of $27.88 per barrel in January. This has driven up the Russian ruble and energy stocks. (We’ve recently shown the correlation between world currenices and commodities.)
The rally has been so strong over the past three months that it’s signaling an opportunity to take profits or wait for a correction. Based on the 20-day oscillator, Brent’s up 1.3 standard deviations, which suggests a correction over the next three months.
Oil has historically bottomed in January/February. The rally this year has not disappointed. Further, it has helped many domestic banks that have been big lenders to the energy sector. High(er) oil prices translate into stronger cash flows for loans.
- The major market indices finished mixed this week. The Dow Jones Industrial Average gained 0.59 percent. The S&P 500 Stock Index rose 0.52 percent, while the Nasdaq Composite fell 0.65 percent. The Russell 2000 small capitalization index gained 1.39 percent this week.
- The Hang Seng Composite gained a modest 0.10 percent this week; while Taiwan fell 1.89 percent and the KOSPI was flat, up 0.04 percent.
- The 10-year Treasury bond yield rose 13basis points to 1.89 percent.
Domestic Equity Market
- Energy was the best performing sector for the week, increasing by 5.20 percent versus an overall increase of 0.52 percent for the S&P 500.
- Endo International was the best performing stock for the week, increasing 29.05 percent. The bullish sentiment this week was due to a few recent analyst reports. On Monday, Deutsche Bank said the shares were “undervalued” after the selloff seen in prior weeks. On Thursday, JMP Securities initiated coverage on the company with an “Outperform” rating.
- Although other suitors have dropped out, Verizon Communications pressed forward in its bid to acquire Yahoo. The combined company would allow Verizon to expand web-based video services and improve revenue from online advertising.
- The utilities sector was the worst performing sector for the week, falling by -3.23 percent versus an overall increase of 0.52 percent.
- Illumina was the worst performing stock for the week, falling -17.31 percent. A weak earnings forecast, driven by disappointing sales in Europe, hammered shares of the genetics analysis biotechnology firm.
- Five of the six largest U.S. banks missed earnings targets in the first quarter. In addition to lower levels of trading desk revenue, the low interest rate environment has impacted net interest rate margins.
- The consensus among commodity strategists is for a rebalancing of global oil markets in the second half of this year and modestly higher oil prices. The rebalancing should be driven by larger-than-expected production declines. This could help energy stocks rally.
- The tighter U.S. labor market is pushing up wage and salary growth, supporting robust gains in revolving consumer credit. Rising income growth also suggests credit quality is unlikely to become a profit drag. Both of these are positive factors for consumer finance companies.
- While technology sector profits are disappointing, on the back of lackluster volume growth and deflation, the same is not true for health care companies. Several large-cap health care firms have reported robust earnings results reflecting steady, non-cyclical demand growth and burgeoning pricing power.
- Regarding earnings, BCA expects that trends in both pricing power and wage costs will constrain overall profitability. The lack of corporate pricing power extends far beyond the energy and materials sectors, and is reflected in the weakness in nominal GDP growth, both in the U.S. and the rest of the world. Meanwhile, sluggish labor productivity growth and the low unemployment rate suggest that unit labor costs are more likely to rise than fall, even if nominal wage growth remains somewhat contained.
- Equities have the potential to lose, regardless of whether Fed doves or hawks gain the upper hand. If the Federal Reserve remains on hold, the yield curve should flatten further as Treasury yields remain capped by excess global savings and central bank bond purchases abroad. That should undermine financial stocks. If the Fed toughens its rhetoric, then the dollar's uptrend would resume and undermine globally exposed equity sectors.
- Google, whose parent company is Alphabet Inc., has been charged by the European Commission. The charges are expected to focus on Google's insistence that smartphones with the Android operating system include Google applications. This integration has boosted advertising revenue for Google's mobile unit. Android accounts for a large portion of the smartphone market in the United States and Western Europe, 59 percent and 71 percent respectively. Unlike Apple and its iOS operating system, Google does not make all Android phones. Alphabet also missed earnings due to rising costs from long-term projects such as driverless cars and home automation.
The Economy and Bond Market
- New jobless claims were only 247,000 versus a consensus of 265,000. Although this is the lowest level since 1971, the size of the labor market is much larger today than it was over 40 years ago. The fact that employers are holding onto their employees may be a good sign for the labor market.
- Existing home sales added 5.1 percent month-over-month in March to 5.33 million from 5.07 million in February.
- The preliminary University of Michigan Sentiment Index for April ticked up to 92 from the previous 91.
- Housing starts fell 8.8 percent month-over-month in March to 1,089,000, down from 1,194,000 in February.
- Industrial Production fell -0.6 percent for March, worse than February’s -0.5 percent.
- The Philadelphia Fed Business Outlook deteriorated to -1.6 in April from 12.4 in March.
- The past six years have witnessed a pattern where weak first-quarter GDP is followed by a strong second quarter. If that remains the case, we should expect higher rates, a higher dollar, and higher equities over the coming months.
- According to Bank of America Merrill Lynch, U.S. dollar (USD) appreciation is likely to fade in 2016. A weaker USD trend should quickly be felt in prices of items with high import content and USD sensitivity such as appliances. A 10 percent drop in the USD could push core personal consumption expenditure (PCE) inflation to 2.0 percent by fourth-quarter 2016.
- The Fed meeting on April 29 is likely to be a "place-holder." The tone of the accompanying press release will be especially important. The Fed will need to adopt a hawkish stance if it wants to signal that a rate hike in June remains on the table.
- The European Central Bank (ECB) held the refinancing, marginal lending and deposit facility rates unchanged at 0.0 percent, 0.25 percent and -0.40 percent, respectively. ECB president Mario Draghi warned that inflation may turn negative in the coming months.
- According to BCA, after testing various scenarios they find that very optimistic recovery rate assumptions are necessary to make high-yield valuation appear compelling.
- Amid an uncertain growth and policy environment, the current low volatility backdrop is unlikely to be sustained.
This week spot gold closed at $1,232.43, down $1.72 per ounce, or -0.14 percent. However, gold stocks, as measured by the NYSE Arca Gold Miners Index, rose by 2.76 percent. Junior miners outperformed seniors for the week as the S&P/TSX Venture Index traded up 3.52 percent. The U.S. Trade-Weighted Dollar Index gained 0.39 percent for the week.
|Apr-19||Germany ZEW Survey Current Situation||50.8||47.7||50.7|
|Apr-19||Germany ZEW Survey Expectations||8.0||11.2||4.3|
|Apr-19||U.S. Housing Starts||1168k||1089k||1194k|
|Apr-21||Eurozone ECB Main Refinancing Rate||0.000%||0.000%||0.000%|
|Apr-21||U.S. Intial Jobless Claims||265k||247k||253k|
|Apr-25||U.S. New Home Sales||520k||--||512k|
|Apr-26||H.K. Exports YoY||-7.0%||--||-10.4%|
|Apr-26||U.S. Durable Goods Orders||1.9%||--||-3.0%|
|Apr-26||U.S. Consumer Confidence Index||96.0||--||96.2|
|Apr-27||U.S. FOMC Rate Decision||0.50%||--||0.50%|
|Apr-28||Germany CPI YoY||0.1%||0.3%|
|Apr-28||U.S. Initial Jobless Claims||260k||247k|
|Apr-28||U.S. GDP Annualized QoQ||0.6%||1.4%|
|Apr-29||Eurozone CPI Core YoY||0.9%||--||1.0%|
- The best performing precious metal for the week was palladium, up 5.99 percent. Although gold consolidated this week, platinum group metals (PGMs) continued to climb. Gold and silver prices have far outpaced PGM prices in 2016.
- Gold advanced early in the week as turmoil across oil markets increased demand for a safe haven, reports Bloomberg. “The market these days seems to follow oil, with gold trading the opposite way,” explains ABN Amro analyst Georgette Boele. On a similar note, a silent gold rush has emerged among world oil producers, writes Bloomberg. The demand may continue through central bank purchases, increased consumer appetite, and mining supply.
- Swiss gold exports rose to 117.9 metric tons in March, reports Bloomberg, up from 93.1 metric tons in February. Other positive news for the precious metal shows that gold traders and analysts are bullish for the first time in three weeks as prices reach their highest in a month. Bloomberg News reports that silver imports by China climbed in March, up 13.7 percent year-over-year to 251.2 metric tons.
- The worst performing precious metal for the week was gold, down -0.13 percent. UBS and Macquarie believe the yellow metal has peaked. Macquarie is tipping gold to edge down slightly this year to $1,199, reports the Sydney Morning Herald, and downgraded a range of Australian gold miners.
- HSBC and four other banks accused of fixing gold prices for 10 years could face “substantial damages” should the case have staying power, reports Bloomberg. Trillions of dollars’ worth of gold and gold-based derivatives and securities are alleged to have been affected by the gold fix, the article continues. Interestingly enough, now China has stepped forward to fill the void, announcing on Tuesday the start of its twice-daily price fixing in a move to be the new price setter versus London or New York.
- Detour Gold provided an update this week related to the investigation of an employee’s death at Detour Lake Mine. The company was charged on Thursday with “criminal negligence,” according to Bloomberg, causing death under the Criminal Code of Canada. Certain individuals may also face charges in the investigation.
- Bank of America thinks the breakout we are witnessing in silver is for real, stating in a technical report this week that the precious metal could begin a bull move higher. Deutsche Bank agrees and believes silver could rise to $20 in near-term momentum. Silver has outperformed gold in nine of the last 10 sessions, reports Bloomberg, with the gold/silver ratio falling to the lowest since October. In a related article from ZeroHedge, the group writes that while Comex silver inventories have been declining from a peak in July 2015 to today, silver stocks at the Shanghai Futures Exchange have been doing the exact opposite. Silver inventories at the SHFE began to pick up in 2016, surging to 802 metric tons in January from 596 metric tons in December.
- Gold could reach $1,400 an ounce over the next 12 months, says BNP Paribas SA, citing central bank overreach. “There has clearly been an uptick in general investor concern about the eroding effectiveness and potential overreach of global central bank policies,” explains BNP’s wealth-management arm in a briefing on Thursday. Both Capital Economics and Cantor Fitzgerald are bullish on the gold price as well, as real interest rates will probably stay low even if the Fed raises borrowing costs in response to higher inflation, reports Bloomberg.
- China wants greater clout in the global bullion industry, reports Bloomberg. The nation’s gold miners plan to extend the biggest buying spree in four years, with some of China’s top producers saying they want to build on last year’s spree (when the nation spent the most on overseas gold assets since 2011). Japan’s Sumitoma Metal Mining was also cited by Bloomberg, expressing its interest in acquiring overseas gold mining assets.
- HSBC sees potential roadblocks for gold to move higher, according to an article on Scrap Register. “The gold rally is most under threat from the resurgence in investor risk appetite,” HSBC analysts stated. “The move in stocks to fresh 2016 highs, if the run continues, may rob gold of some of the oxygen it needs to continue to rally.” Goldman agrees that gold could slump this year, citing its forecast for the Federal Reserve to hike interest rates three times.
- Gold could be put on pause in the near-term, according to RBC Capital Markets. In a research report this week, the group highlights the extreme long positioning and the waning momentum in global gold ETF holdings.
- According to Mineral Resources Minister Mosebenzi Zwane, South Africa’s government will meet next week with mining companies to resolve a dispute over black ownership laws. Sibanye Gold, South Africa’s biggest gold miner, has criticized the country’s planned Mining Charter, reports Bloomberg, saying some aspects of the legislation are “not acceptable” in its current form. The Democratic Republic of the Congo is dealing with similar issues. The government suspended the payment of value-added tax reimbursements to all companies until further notice, reports Bloomberg, in an attempt to shore up finances as the deficit balloons.
Energy and Natural Resources Market
- Global gasoline demand rose 3.6 percent in February according to Eurostat data. Analysts at Tudor Pickering Holt highlight that U.S. and Middle East demand were the main growth drivers, taking demand numbers decisively above their five-year range.
- The best performing sector for the week was the TSX Diversified Metals and Mining Index. The index rallied 14.45 percent for the week following strong copper import data out of China.
- Newmont Mining, the largest U.S.-based gold producer, rose 5.7 percent on Thursday after first quarter earnings beat analysts’ estimates. The company’s output of 1.23 million ounces beat forecasts, while costs dropped to $828 per ounce.
- Crude oil’s upward momentum may fade as supply outages get resolved. Energy strategists at Tudor Pickering Holt argue we are likely to see a reversal of the lost Kuwaiti oil production as well as other issues being resolved, including North Sea maintenance, Canadian maintenance, Nigeria pipeline outages and others.
- The worst performing sector for the week was the S&P 500 Utilities Index. The index fell 3.23 percent as a rally in commodities, led by strong data out of China, along with higher U.S. treasury yields made safe utilities’ equities less appealing.
- Vale SA, the Brazilian iron ore and nickel giant dropped 8.9 percent on Thursday, the most in a month after it reported weak production results. Iron ore output dropped 77.5 million tons in the first quarter, forcing the miner to downgrade full year 2016 guidance.
- China’s total social financing (TSF) surged to RMB 2.34 trillion, a 42.8 percent increase from the previous year, as shadow banking credit rises to the strongest quarter since the second quarter of 2014. Credit availability has facilitated a 36 percent surge in Chinese refined copper imports for the first quarter, as well as marked decreases in iron ore inventories for April.
- Crude prices are getting support after the International Energy Agency (IEA) said that 2016 would see the biggest fall in non-OPEC output in 25 years. IEA chief Fatih Birol said, "This year, we are expecting the biggest decline in non-OPEC oil supply in the last 25 years, almost 700,000 barrels per day. At the same time, global demand growth is in a hectic pace, led by India, China and other emerging countries."
- As many as 100 million households worldwide may be powered by solar panels by 2020, according to Bloomberg. The $700 million off-grid solar market may swell to $3.1 billion by the end of the decade, which will result in significant demand boosts to copper, aluminum and other minerals.
- The Doha meeting failed to reach an accord to freeze output, which may reignite the race for market share among OPEC members. Saudi Arabia announced it may increase its production by 1 million barrels per day, while Russia warned that “in theory” it could raise its own production by 1 to 2 million barrels per day.
- Citi cut its metals and mining short-term outlook to bearish from neutral after the first quarter’s rally leaves valuations stretched despite an upgraded commodity price outlook. According to the bank’s analysts, earnings’ momentum and dividend support are missing, thus increasing price risk considerably.
- CLSA downgraded a number of mining companies to a Sell rating, warning that China macro factors may fade. Despite strong construction numbers, overall activity may only recover modestly as high inventory remains. In addition, falling power generation investment and high air-conditioner inventories may put copper demand under pressure.
- Indonesia’s Jakarta Composite Index closed the week at its highest levels of 2016, as seen in the chart below.
- Property prices in China (like China’s middle class), continue to rise, particularly in massive first-tier cities like Shanghai, Beijing and Shenzhen. Average prices are up more than 24 percent year-over-year in these cities.
- The Malaysian ringgit held up fairly well this week, as did oil, following the failed Doha talks last weekend regarding an oil production freeze. Malaysia is the region’s only net energy-exporting country.
- The Shanghai Composite Index was the worst performing equity index in the world this week, falling 3.86 percent.
- Hong Kong’s jobless rate for the March period came in at 3.4 percent, its highest level in 28 months and slightly worse than expectations for 3.3 percent.
- The Chinese yuan fell against a trade-weighted basket for a fourth straight week, as investors continue to expect the currency to weaken in the future.
- Early next week South Korea releases first quarter GDP numbers. Analyst consensus expects a 2.7 percent year-over-year growth rate.
- China will release its March period year-over-year measurement of Industrial Enterprises Total Profits, while investors will be looking for signs of stabilization in the Chinese economy.
- Bloomberg reported this week that China’s biggest tax overhaul in more than two decades will begin on May 1. This will lower corporate taxes by some 500 billion yuan this year, primarily by changing taxes in the construction, property, finance and consumer services sectors to value-added, as opposed to the revenue-based levy currently in existence.
- Authorities in China’s Zhejiang province have proposed further reductions in local gas pricing, which may weigh upon natural gas companies, particularly if more provinces were to follow suit.
- Concerns about rising corporate defaults in China continue to worry some investors. Billionaire investor George Soros garnered headlines Wednesday after reiterating bearish views on China and its credit market, saying that the state of China’s credit-fueled economy reminds him of the U.S. in 2007/2008.
- The currency situation across the broader region may continue to be complicated by various factors such as U.S. monetary policy, oil prices, Japanese NIRP, and the direction of the Chinese yuan, to name a few.
- Greece was the best performing country this week, gaining 5.4 percent. Athens’ stock exchange appreciated as the Greek government is working on the first bailout review with creditors. There is rising optimism that a deal could be announced soon.
- The Ukrainian hryvnia was the best performing currency this week, gaining 43 basis points against the dollar. Ukraine’s central bank trimmed its main interest rate for the first time since September, saying it would make further cuts if recent disinflation continues and the nation’s U.S. $17.5 billion bailout is resumed.
- The material sector was the best performing sector among Eastern European markets this week.
- Romania was the worst performing market this week, losing 1.5 percent. Ten stocks are trading on the Bucharest Stock Exchange and the biggest price drop was recorded in Romgaz, the oil and gas exploration and production company. Shares of Romgaz declined by 6.8 percent after its shareholder Fondul Proprietea sold shares though private placement.
- The Polish zloty was the worst performing currency this week, losing 2.1 percent against the dollar. The zloty may face headwinds because of the looming Brexit referendum and return of the Swiss franc (CHF) mortgage conversion proposals.
- The health care sector was the worst performing sector among Eastern European markets this week.
- The European Central Bank (ECB) met this week and eurozone central bankers have left rates unchanged as expected. However, 47 analysts who cover the ECB estimate that further cuts are expected at a later date. Most analysts predict the next stimulus to be announced in September, but some see it happening as early as June. Additional stimulus should lift equities.
- Greece announced that it has achieved an adjusted primary surplus of 0.7 percent of gross domestic product in 2015. This figure was better than the 0.25 adjusted deficit that Greece had to achieve under its latest bailout program. Adjusted primary balance takes out interest payments and other one-off spending items and it has become an important factor in the eurozone discussion on whether Greece should be granted further debt relief. According to Eurostat, the EU’s statistic agency, Greece’s overall debt deficit in 2016, including interest and other government spending, was 7.2% of gross domestic product.
- April’s Economic Confidence data for the eurozone area will be reported next week and Bloomberg economists predict slight improvement.
- The MSCI Emerging Markets Europe Index and Brent crude oil had a quite big move to the upside since the January 21 low, and a correction may be coming.
- U.S. President Barack Obama arrived in the U.K. on Thursday to urge the British public to vote to remain in the European Union in the June 23 Brexit referendum. His arrival was welcomed by Prime Minister David Cameron but Eurosceptic said that Obama should not get involved in the U.K.'s eurozone membership debate. U.K. Treasury Chief George Osborne said Brexit would lead to a 6 percent drop in GDP.
- The market has seen rollercoaster swings in the oil price after oil producers failed to agree on a production freeze. The chart below shows Brent’s daily price action before and after the Doha meeting. Russia remains vulnerable to turmoil in the energy market as oil and natural gas accounts for about a third of Russia’s budget revenue and almost 60 percent of its exports.
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