Oil Price Rally Continued

October 19, 2016

West Texas Intermediate crude oil, which traded at $43.30 per barrel just a month ago, rose another 1.5% overnight to $51.02 per barrel. Investors are reasonably confident that OPEC will find the discipline with Russia to reach an accord limiting production.

Comex gold advanced 0.7% to $1,271.50 per troy ounce, and the dollar is modestly lower with overnight losses of 0.3% against the loonie, 0.2% relative to the Swiss franc, Aussie dollar and kiwi, and 0.1% vis-a-vis the yen, yuan and euro. Sterling is steady.

Chinese on-year real GDP growth was suspiciously stable at 6.7% for a third straight quarter in 3Q. On-quarter growth was 1.8%, same as in the second quarter. If one believes the accuracy of the data, and many do not, China’s slowdown has stopped at least temporarily.

In other released Chinese data today,

  • Industrial production posted a 12-month increase of 6.1% in September, less than August’s 6.3% and below the predicted figure but still the third greatest on-year advance since April.
  • On-year growth in retail sales accelerated to 10.7%, the most so far in 2016, from 10.6% in August and 10.2% in July.
  • Fixed asset investment in January-September was 8.2% greater than a year earlier. That’s up from 6.1% in January-August but down from 10.7% in the first quarter of this year.

Share prices in the Pacific Rim closed mixed, with increases of 0.7% in Taiwan, 0.5% in Australia, Singapore and South Korea and 0.2% in Japan but dips of 0.5% in Hong Kong, 0.4% in Indonesia and 0.2% in India. China’s market was unchanged.

The 10-year German bund and Japanese JGB yields dipped a basis point, and their British counterpart is down two basis points.

U.K. labor statistics showed a smaller-than-forecast 0.7K rise in jobless claims, and unchanged 4.9% unemployment rate on an ILO basis, and on-year wage growth of 2.3% as of June-August.

Japan’s all industry index increased 0.2% on month in August, same as July’s on-month advance as a 1.3% rise in industrial production offset a 0.8% drop in construction and no change in services.

Euroland construction output sank 0.9% in August after having increased 1.5% in July. This reduced the 12-month rate of increase to 0.9% from 4.1%.

In the year to September, South Korean producer prices fell 1.1%, and South African consumer prices went up 6.1%.

On the central banking front,

  • The Central Bank of Chile left its key interest rate unchanged at 3.5% and released a statement that said inflation had fallen toward 3.0% faster than expected and projected modest growth in output and demand.
  • The Bank of Canada is holding a monetary policy meeting in which it is expected to retain a target interest rate of 0.5%. An updated Monetary Policy Report is due as well.
  • Copom, Brazil’s monetary policy committee, will announce its latest decision regarding the Selic interest rate, which has been 14.25% since July.
  • The Federal Reserve Beige Book of regional economic conditions will be reported, and John Williams, President of the San Francisco Fed District, will be speaking publicly.

Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

 

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