Oil Price Gets Support from China Stimulus Push
China’s pledge to cut taxes and stimulate growth boosted oil prices on Tuesday, as traders looked to the world’s second-largest economy for clues about the future of demand growth in one of the world’s biggest energy-consuming regions.
Crude prices rose across the board on Tuesday, more than offsetting the previous day’s drop. The West Texas Intermediate (WTI) benchmark for U.S. crude futures reached a session high of $52.00 a barrel on the New York Mercantile Exchange. It was last up $1.24, or 2.5%, at $51.75 a barrel. ICE Brent, the global crude benchmark, rose $1.13, or 1.9%, to $60.12 a barrel.
Higher oil prices boosted energy shares at the start of New York trading. The S&P 500’s energy index is up 0.3%.
Oil is still in the throes of a protracted bear market but has shown signs of stabilizing since OPEC began slashing its output. Saudi Arabia has also stepped up its effort to rebalance the market by lowering its crude exports this month.
China Responds to Slowing Economy
China’s finance ministry has pledged to lower taxes and boost government spending as part of a cocktail of policies designed to counter a weakening economy. Under the newly announced plan, Beijing will lower value-added tax rates on some businesses and increase fiscal expenditure this year. The People’s Bank of China (PBOC) has also announced it will make monetary policy more forward-looking and flexible in the future.
Meanwhile, China’s National Development and Reform Commission (NDRC) says the economy aims to achieve “a good start” in the first quarter, a sign the government body is prepared to adopt new measures to stimulate growth.
China’s exports plunged in December at the fastest rate in two years, signaling weaker demand in the global market. Imports also fell at the fastest rate in two-and-a-half years. The report follows a string of lackluster data releases that paint a grim picture of China’s near-term growth prospects, which have been further complicated by an escalating trade war with the United States.
German Economic Growth Hits Five-Year Low
Germany’s economy faced strong headwinds in 2018, as the export-driven country struggled with weaker demand and new automotive standards. German gross domestic product (GDP) expanded just 1.5% in all of last year, the slowest rate since 2013, the Federal Statistics Office reported Tuesday.
The economy was expected to grow 1.8% in 2018 after reaching a 2.2% clip the year before. German exports faced disruptions in the third quarter, which led the economy to contract.
The fate of the Eurozone is tied to Germany, which accounts for roughly one-third of the bloc’s economic output. Although the German economy likely avoided recession in the fourth quarter, the latest weak patch could have dire consequences on the currency region at a time when its peripheral members were still struggling.
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