A Drop in Commodity Prices

March 30, 2015

There’s been a decline in oil and metal prices to start the bridging week between the first and second quarters of 2015.  WTI oil lost 1.9% to $47.96, and Comex gold is 1.1% lower at $1,187.20 per ounce.

Stocks and the dollar, on the other hand, have strengthened.

The bid tone in share prices was set by dovish remarks from China’s central bank Governor Zhou about the risks of deflation and remaining scope for the Peoples Bank to cut interest rates further if needed.  Stocks rose 2.9% in China but also 1.9% in India, 1.5% in Hong Kong, 0.8% in Indonesia, 0.5% in Japan, and 0.5% in South Korea.  Markets in Australia (down 1.3%) and New Zealand (off 0.6%) were exceptions, depressed by lower commodity costs.  In Europe, equities have advanced so far by 1.4% in Germany, 1.1% in France and Italy, 0.9% in Switzerland, 0.8% in Spain, and 0.4% in Great Britain.

A generally stronger dollar shows gains of 1.1% against the Australian dollar, 0.7% versus the kiwi, 0.6% vis-a-vis sterling, 0.5% relative to the yen, 0.4% against the euro, 0.3% versus the yen and 0.2% relative to the Swiss franc.  The yuan edged 0.1% higher against the dollar.

Ten-year yields on British gilts, Japanese JGBs and German bunds are respectively a basis point higher, unchanged, and down by a basis point.

Clocks in Europe were moved an hour forward on Sunday, restoring the usual difference vis-a-vis time in U.S. cities.  Note that Japan does not observe daylight savings time.

Japanese industrial production and shipments each tumbled back 3.4% in February versus an expected decline of 1.9%.  The ratio of inventories to shipments jumped 4.3% on month and 9.3% on year.  Ministry of Economics, Trade and Industry officials nonetheless stuck to the view that production is showing signs of a moderate rate of increase.  A drop in output of 2.0% is predicted for March followed by a 3.6% increase in April.

Bank of Japan Governor Kuroda expressed confidence that inflation would resume accelerating in the final quarter of this year.

South Korean business sentiment slipped 3 points to a reading of 76 in April.  Manufacturing dropped two points to 80, and non-manufacturing was unchanged at 74.

Eurozone sentiment indices were released for the month of March by Eurostat.

  • Economic sentiment climbed by a greater than forecast 1.6 points to a 45-month high of 103.9.
  • Industrial sector sentiment rose 1.7 points to minus 2.9.
  • Sentiment in services improved 0.7 points to 6.0.
  • Sentiment in retail went up 0.6 points to -0.7, and consumer confidence climbed 3.0 points to -3.7.
  • Construction’s reading of -24.2 remains a laggard but was 0.9 points stronger than in January.
  • Euroland’s business climate index printed at 0.20, up from 0.09 in January and the best score since November.

Based on preliminary data, German consumer prices in March rose 0.5% versus February and accelerated to an on-year pace of 0.3% from 0.1% the month before.  On a harmonized basis, however, inflation stood at 0.1%.

Italian consumer confidence improved 3.2 points to a 110.9 reading in March.  Business sentiment in Italy also gained 3.2 points to 103.7.

Spanish consumer prices fell 0.7% in the year to March after a 1.2% drop between February 2014 and February 2015. 

Greek producer prices recovered 4.2% in February, cutting the 12-month rate of decline in half to 4.8%.

Belgian CPI inflation remained at negative 0.4% in March.

Austrian PPI deflation narrowed to 1.3% in February from 1.8% in January and 1.4% in December.  Austria’s manufacturing purchasing managers index fell a full point to a 4-month low of 47.7 in March. Readings have been below the 50 threshold between contraction and expansion since last September.

Portuguese consumer confidence rose 2.0 points to -19.2 in March, the highest score since April 2002.  Business sentiment rose by 0.3 points to a reading of 0.6.  Portuguese retail sales and industrial output were respectively 2.2% higher and 1.0% lower in February than a year earlier.  Portugal’s jobless rate increased for a third straight month in February, climbing to 14.1% from 13.8% in January.  Still such was 0.8 percentage points below the year-earlier level.

A survey of British financial services found the most optimism this quarter since the final quarter of 2013.

M4 money growth in the U.K. was more deeply in the red in February with an on-year drop of 3.2% versus 2.2% in January.  But mortgage approvals of 61,780 were at their highest level since last August.

In South Africa, M3 money and private credit posted on-year rises in February of 8.1% and 8.7%, respectively, after 7.4% and 9.2% in January.

U.S. personal income and spending, pending home sales, and the Dallas Fed manufacturing index arrive today.  So do Canadian producer prices.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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