Oil racks up more gains on US-Iran tensions, gold breaks $1,400

The US drown shot down over the Gulf of Oman sent oil prices soaring more than six percent Thursday. (AFP)
Updated 21 June 2019

Oil racks up more gains on US-Iran tensions, gold breaks $1,400

HONG KONG: Oil prices rose again Friday, extending the previous day’s surge on tensions between the United States and Iran, while gold rose above $1,400 an ounce for the first time since 2013.

Fears of a conflict in the crude-rich Middle East ratcheted up Thursday when Tehran said it had shot down a US “spy drone” that was violating its airspace, which Washington denied.

Donald Trump described the move as a “big mistake”, adding: “This country will not stand for it”.

The news – which comes a week after the US accused Iran of attacking two tankers in the Gulf of Oman – sent oil prices soaring more than six percent Thursday, while talk has increased of a military stand-off that could deal a massive blow to supplies.

Observers said the cost of crude could continue to rise.

“If we meld supply risk fear, a powerfully bullish narrative, (the Federal Reserve’s) willingness to execute a pro-cyclical rate cut juicing risk assets and frame it with the potentially game-changing G20, you have the makings of a solid base for oil to shoot even higher,” said Stephen Innes, managing partner at Vanguard Markets.

The focus is also on next week’s planned meeting between Trump and his Chinese counterpart Xi Jinping on the sidelines of the G20 in Japan next week.

Trump’s tweet about “a very good telephone conversation” between the pair this week fuelled a surge across global markets on hopes for a deal to end their countries’ long-running trade war that has impacted the world economy.

However, Asia took a step back Friday, having been given an extra boost by the Fed indicating it will begin to cut interest rates soon, and other central banks erring towards softer monetary policies.

Gold breaks $1,400

A cheaper dollar and tensions in the Middle East have also ramped up demand for gold – seen as a go-to asset in times of uncertainty and upheaval – sending it above $1,400 an ounce for the first time since 2013.

“Gold jumped more than three percent on Thursday as the Fed left little doubt that an interest rate (cut) is coming and with trade and political tensions still at play the yellow metal was a clear choice for investors looking for a safe haven,” said OANDA senior market analyst Alfonso Esparza.


Microsoft shares fall 4% after warning of coronavirus hit to supply chain

Updated 28 February 2020

Microsoft shares fall 4% after warning of coronavirus hit to supply chain

  • Drop in share price wiped off nearly $50 billion from the Microsoft’s market value
  • Apple was the first big technology firm to come out and say the virus was affecting its production and demand in China

NEW YORK: Shares of Microsoft Corp. fell more than 4 percent on Thursday after the company warned of weakness in PC business due to a hit to its supply chain from the coronavirus outbreak, echoing similar statements from Apple Inc. and HP.

The drop in share price wiped off nearly $50 billion from the Microsoft’s market value on a day when broader markets were down more than 2 percent.

The virus has so far infected about 80,000 people, killed nearly 2,800 and spread to 44 countries, after originating in the central Chinese city of Wuhan late last year.

Apple was the first big technology firm to come out and say the virus was affecting its production and demand in China. PayPal Holdings Inc. and Mastercard Inc. have also warned about a possible hit.

Microsoft said on Wednesday its supply chain was returning to normal operations at a slower pace than anticipated and its Windows and Surface computers had been more negatively impacted than expected.

“Finished good inventory levels matter. If Microsoft had not fully assembled and packaged Surface units in the channel, then the impact would be felt faster and more severely,” Morningstar analyst Dan Romanoff said in a mail.

The global stock markets have also taken a hit as investors grew cautious of the impact of the virus on global supply chains. The Dow Jones Industrials index dropped more than 400 points at the open on Thursday.

Several Wall Street analysts expect other technology companies with heavy presence in China to soon come out with their own statements.

“Given there seems to be weakness in the PC supply chain, it would seem highly likely to me that we hear something from Intel,” Atlantic Equities analyst James Cordwell said in a mail.

Andrew MacMillen, an analyst with Nucleus Research, said that PC makers such as Dell Technologies Inc. and Lenovo Group could be seeing some difficulties.

Dell, the world’s third-biggest PC maker after Lenovo Group and HP, will report quarterly earnings after market close on Thursday. It has a sizeable exposure to China.

Microsoft said on Wednesday it would miss its own third quarter revenue forecast for the PC unit, which houses Windows, of $10.75 billion and $11.15 billion. 

J.P.Morgan analysts said that Microsoft’s guidance is a supply chain issue, not a demand issue, but it was possible that broad supply chain issues plus investors becoming increasingly averse to risk could metastasize into demand issues over time.