Oil falls as OPEC slashes demand forecasts

Good morning. Here's what happened overnight and what you need to know today.

1.

Crude squeeze: Oil prices fell over 2% after OPEC cut its global oil demand growth forecast for 2024 and 2025, its third consecutive downward revision, primarily due to weaker Chinese demand. The group now expects oil demand to rise by 1.93 million barrels per day (bpd) in 2024, down from its previous forecast of 2.03 million bpd. Its forecast for China, the world’s biggest importer of crude oil, was lowered from 650,000 bpd to 580,000 bpd as oil imports fell for the fifth consecutive month. Brent crude futures, the global benchmark, dropped to USD77.44 ($115.16) per barrel, while West Texas Intermediate slid to USD73.92. The weaker demand forecast was driven by China’s economic slowdown, falling oil imports and a shift towards cleaner energy. The price fall also followed weak inflation and trade data in China, which signalled sluggish domestic amid Chinese officials' talk of stimulus. (Capital Brief)

2.

Outlook clash: The Q3 earnings season in the US is underway with a big divergence between company outlooks and analyst forecasts, Bloomberg reported. Analysts predict companies in the S&P 500 will post their weakest result in the past four quarters with an aggregate increase of just 4.2% in earnings, down from an expected 7% in July. Company guidance, however, implies a 16% jump, according to the Bloomberg data. Earnings season will be a big test for the stock market’s USD9 trillion ($13 billion) rally this year, which pushed the S&P 500 to a new record intraday high on Monday. Gina Martin Adams, chief equity strategist at BI, said the dichotomy was “unusually large,” and the significantly stronger outlook suggests “companies should easily beat expectations. Margins should keep marching higher as companies emphasize efficiency amid economic uncertainty,” she wrote in a note. (Capital Brief)

3.

Fee crackdown: Debit card surcharges could be banned by January 2026, with the Albanese government proposing a consultation with the Reserve Bank of Australia to address the issue. In the meantime, an additional $2.1 million was allocated to the ACCC to clamp down on excessive surcharges, the PM’s office said in a statement. Treasurer Jim Chalmers also said the government would move to reduce payment fees for small businesses. The announcement is part of the government's broader pre-election focus on cost of living, which includes a crackdown on supermarket price practices, such as ‘shrinkflation,’ and a push for tougher penalties on Coles and Woolworths for alleged price gouging. (Capital Brief)

4.

Crypto politics: Bitcoin surged to a two-week high, climbing 5.6% following reports US Vice President Kamala Harris was pledging support for a cryptocurrency regulatory framework, fuelling optimism among traders. The largest digital asset traded at USD65,630 ($97,640) in New York by midday (Tuesday early morning AEST). Other tokens like Ether and Solana followed suit, gaining 4.2% and 3.8%, respectively, while shares of crypto-related companies Coinbase and MARA Holdings also rose. The Democratic presidential candidate unveiled policy proposals aimed at Black men that include boosting access to the cryptocurrency industry for Black Americans and access to a new legal recreational marijuana industry. Her stance comes as rival presidential candidate Donald Trump has also courted crypto voters ahead of the November election. (Capital Brief).

5.

New AI record: Nvidia shares surged as much as 3.5% on Monday to USD139.60 ($206.72), nearing its USD140.76 record high as investors bet on strong demand for its next-gen Blackwell AI chips. Following reports earlier this year that Blackwell was delayed due to engineering issues, CEO Jensen Huang recently said the chips were “in full production” with orders booked for the next 12 months. The latest gains lifted Nvidia's market value to USD3.4 trillion, once again closing in on Apple’s USD3.5 trillion valuation. Analysts expect Nvidia’s revenue to more than double this fiscal year, as AI investment continues to grow, driven by demand from tech giants like Microsoft and OpenAI. (Reuters)(Bloomberg)

6.

China ambitions: HSBC is reviewing its China-based digital wealth division, Pinnacle, amid concerns over spiraling costs and operational controls, potentially leading to layoffs, Reuters reported citing unnamed sources. The review, launched months ago and expected to be completed by the end of the year, could result in a major setback for the bank's ambitions in the region. It is examining employee salary structures and investigating whether suppliers inflated costs, leading to a sharp rise in expenses that outpaced revenue growth, the publication said. According to Reuters HSBC’s registration records show HSBC has invested USD390 million ($580 million) in Pinnacle since its 2020 launch, but the division remains unprofitable. It reported a USD46 million loss in the first half of 2024 as it has struggled to expand HSBC's reach in China and grow revenues. HSBC declined to comment to Reuters. (Reuters)

7.

EV tensions: Chinese and European automakers went head-to-head at the Paris car show on Monday amid looming EU tariffs on Chinese electric vehicles as the industry struggles with weak demand, Reuters reported. Nine Chinese brands, including BYD and Leapmotor, unveiled models while European manufacturers, like Stellantis, tried to defend their market position after a massive profit warning. BYD warned the tariffs would raise prices and deter customers, while Stellantis said they might force Chinese companies to open European plants, exacerbating overcapacity. The EU is set to impose duties of up to 45% on Chinese-made EVs at the end of October, countering alleged unfair subsidies from Beijing. Despite ongoing EU-China trade negotiations to work on an alternative deal that avoids the need for levies, no agreement has been reached, and Beijing has threatened retaliatory tariffs on European goods like luxury cars and cognac. (Reuters)

8.

Diplomatic saga: Canada and India expelled each other’s diplomats in an escalating dispute over the June 2023 assassination of Sikh activist Hardeep Singh Nijjar in Canada, according to media reports. Six Indian diplomats, including the high commissioner, were expelled after Canadian officials linked them to violent criminal activity, The New York Times reported. Shortly after, India retaliated by expelling six Canadian diplomats, including the acting high commissioner. India rejected the allegations and accused Canada of supporting separatism and extremism, saying its diplomats were being unfairly targeted. Tensions between the two countries have escalated since Canadian Prime Minister Justin Trudeau in 2023 accused the Indian government of being linked to Nijjar’s murder, claims that India has denied as politically motivated. (AP)(NYT)