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© Reuters.
Jeffrey Smith
Investing.com — The meeting of the Organization of the Petroleum Exporting Countries ended in chaos, and crude oil prices hit a seven-year high. After China’s cyberspace regulator removed its app from stores across the country, Didi Global ADR (NYSE:) fell by 20%. ISM’s non-manufacturing survey is about to expire, and German data shows that chip shortages are severely hitting the automotive industry. REvil, the organization behind the latest large-scale ransomware attack, demanded $70 million to escape. Here is what you need to know about the financial markets on Tuesday, July 6.
1. The Organization of Petroleum Exporting Countries’ chaos caused oil prices to hit new highs
Crude oil prices rose to their highest level since 2014, after resistance from the United Arab Emirates frustrated the proposals of Saudi Arabia and Russia to further increase production by the world’s largest exporters.
As of 6:20 am Eastern Time (1020 GMT), the futures price was US$76.41 per barrel, up 1.7% from Monday’s closing price, while the futures price rose 0.3% to US$77.39 per barrel.
The lack of agreement means that the so-called OPEC+ group will maintain production at the current level in August despite the rising demand caused by the global economic recovery. However, rising prices also bring the risk of unilaterally increasing production by individual countries defaulting on their contracts, triggering another price war. Goldman Sachs (NYSE:) analysts said in a report to clients on Tuesday that they believe this is unlikely to happen.
So far Tuesday, near-month futures contracts have risen higher than long-term contracts, indicating that the market expects additional oil to enter the market in some way in time.
2. After China’s crackdown, Didi sees a plunge
Didi Global’s share price has fallen by more than 20% in pre-market trading. This is a delayed response to the Chinese authorities’ move to stop acquiring any new customers over the weekend, ostensibly out of concerns about its collection of user personal data.
The Wall Street Journal reported on Monday evening that Chinese regulators had “advised” Didi to postpone the IPO while addressing their concerns. However, without a formal ban and pressure from early investors to let them cash out, the company continued its plan.
Regulators’ actions have not prevented Didi’s existing customers from using Didi’s ride-hailing services in China, but the risk of escalating conflicts with regulators may put pressure on the stock price until the problem is finally resolved. Elsewhere before the IPO, the online recruitment company saw ADR drop by more than 10% because it warned that its BOSS direct employment application is subject to similar restrictions as the Didi application.
3. Stocks are flat; ISM non-manufacturing concerns
The U.S. stock market will reopen in a gentle tone after the Independence Day weekend, with one eye on the minutes of the Fed’s last policy meeting to be released later this week.
By 6:20 am EST, the contract sum total fell by less than 0.1%.
The stocks that may become the focus include the oil and natural gas sector. The key question is whether US shale oil producers can respond to the surge in crude oil prices by increasing production. Anecdotal reports and surveys such as the Federal Reserve Bank of Dallas indicate that the industry has been struggling to attract new funds in recent months and it may be difficult to cash out.
At 10 am Eastern Time, the Institute of Supply Management will release its June report.
4. German factory orders show that the automotive sector is facing chip pressure
The signal from the global economy overnight was mixed: The Bank of Australia said it would reduce the pace of asset purchases, citing a strong economic recovery. However, it still does not want to raise its key interest rate before 2024.
At the same time, Germany fell by more than 3% in May, mainly due to the weakness of the automotive industry. These figures show that the global chip shortage has finally reduced sales and production levels.In addition, Nissan (OTC:) and Honda (NYSE:) Both companies reported that their sales in China fell by 16% to 18% in June.
The good news from the UK is that British Prime Minister Boris Johnson once again promised to end all remaining Covid-19 restrictions on July 19, despite a wave of new cases caused mainly by the delta variant of the virus. Since more than half of adult Britons are vaccinated, the wave of new cases has not led to—at least so far—the number of hospitalizations has risen sharply.
5. Pay danegeld, Kaseya mix
The hacker organization REvil asked the company it destroyed in a widespread ransomware attack before the weekend to provide a total of $70 million.
This attack exploited weaknesses in the software provided by Kaseya and is the latest in a series of increasingly unscrupulous incidents that have weakened companies such as the Colonial Pipeline Company and meat producer JBS.
It is believed that the REvil organization is headquartered in Russia, and Russian President Vladimir Putin only recently discussed the cyber attack with US President Joe Biden. US cybersecurity company stocks were mixed before the market. Fireeye’s stock price rose 1.8%, but Crowdstrike’s stock price fell 0.2%.
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