China has cut its benchmark interest rate. Oil may come under pressure in the coming weeks

The Jackson Hole Symposium is scheduled to begin on Thursday of this week. Various academics, bank chiefs, and central bank governors gather to discuss monetary policy and financial markets. The policymakers will give their interviews at the end of the conference. These interviews could cause significant volatility as they could foreshadow future monetary policy dynamics. In particular, investors will be waiting for Fed Chairman Jerome Powell to speak to clarify the economic outlook and the future trajectory of interest rates.

On Friday, crude oil prices broke a seven-week winning streak. Investors are now focused on the distinct possibility of lower energy demand rather than the certainty of supply cuts. Over the past few weeks, increasingly contradictory economic news has come out of China, crowned by the release of alarming consumer price data indicating that the country is in complete deflation. Problems at some significant real estate construction companies further underscore the slowdown in China’s economic recovery. Over the weekend, another major real estate developer Country Garden found itself in the grip of a debt crisis. China is the world’s largest energy importer, and any sign of economic stagnation will always be bad news for oil bulls.

Asian markets were also down last week. Japan’s Nikkei 225 (JP225) fell by 3.10% for the week, China’s FTSE China A50 (CHA50) lost 0.88%, Hong Kong’s Hang Seng (HK50) ended the week down by 3.99%, and Australia’s S&P/ASX 200 (AU200) ended the week on negative 2.62%.

On Monday, the People’s Bank of China (PBoC) lowered the benchmark one-year lending rate (LPR) to 3.45% from 3.55% previously (3.40% expected). Meanwhile, China’s Central Bank kept the five-year interest rate unchanged at 4.20%. The rate cut is being implemented to support economic development, which is a positive for Chinese stocks. It is also a positive factor for countries with close trade cooperation with China, Singapore, New Zealand, and Australia.