Markets in Helter Skelter Mode as Trump Wins Big and Oil Drops 3.3%

February 24, 2016

Donald Trump captured the Republican caucus in Nevada with 45.9% of the vote to Rubio’s 23.9% and Cruz’ 21.4% third place showing.  With neither Rubio nor Cruz inclined to drop out, Trump’s bid for the nomination looks unstopable. 

Following Tuesday’s difficult day for U.S. stocks, share prices in Europe are registering their worst day since much earlier this month, with declines of 5.2% in Greece, 2.6% in Spain, 2.4% in Germany, 2.1% in France, 1.9% in Italy and Switzerland and 1.5% in the United Kingdom.  In Australia stocks fell 2.1%.  In Asia, there were loses of 1.4% in India, 0.9% in Japan, 1.3% in Hong Kong, and 2.0% in Singapore.

Fears of a June referendum vote for Britain to leave the European Union depressed sterling below the $1.4000 threshold and all the way to an overnight low of $1.3881.  The pound currently is trading near that level, down 0.9% on the day and 5.8% since the end of 2015.

The dollar and yen are benefiting from safe-haven demand.  The U.S. currency has lost 0.3% against the yen but shows overnight gains of 0.9% relative to the kiwi, 0.4% versus the euro, which slipped below $1.10, and Swiss franc, 0.6% vis-a-vis the Australian dollar and 0.2% against the yuan.  This is the Chinese currency’s fourth straight daily downtick.

West Texas intermediate crude oil fell a bit over a dollar to $30.83 per barrel.  Comex gold strengthened 0.6% to $1,234.59 per ounce.

The 10-year British gilt yield dropped seven basis points to 1.36%.  The Japanese 10-year JGB is off 3 basis points at -0.04%.  Other sovereign debt yields have declined, too.

Bundsbank President Weidmann, a chronic critic, of quantitative monetary stimulus, again asserted that the eurozone recovery trend is secure and that continuing heavy unconventional stimulus carries long-term risks.

Bank of Japan Governor Kuroda reiterated that the central bank may take further counter measures to prevent slippage in its struggle to achieve 2% inflation.

Japan’s index of leading economic indicators printed at 102.1 in December, down 1.1 points from Novemberlowest since January 2013.  The coincident index dropped 1.0 point to a 28-month low.

Small business sentiment in Japan rose 0.7 to 47.9 in February, a 2-month high after hitting a 7-month low in January.

Japanese corporate service prices fell 0.6% on month in January, most in over a year, and was a mere 0.2% above its year-earlier level.

The size of the Bank of Japan’s balance sheet crossed above 400 trillion yen in the middle third of February, reflecting on-going quantitative stimulus.

Australia’s labor cost index posted a non-seasonally adjusted 2.1% on-year advance last quarter, down from 2.6% in the year to 4Q14 and 2.5% in the year to 4Q13.  The on-quarter seasonally adjusted increase was 0.5% from the 3Q level.

Chinese consumer confidence fell 3.1% to a reading of 111.3 in February according to a measure compiled by Westpac.

British mortgage approvals increased to an 11-month high of 47,509 in January according to BBA figures.

The U.K. monthly distributive trades index fell to a 3-month low of +10 in February from 16 in January and 19 in December.

Italian industrial orders sank 2.8% on month in December, as domestic demand plunged 4.8%.

French consumer confidence printed at a 6-month low of 95 in February, 2 points lower than in January.

Between the final quarters of 2014 and 2015, real GDP rose 1.8% in Singapore and 1.9% in Hong Kong.  Singapore growth averaged 2.0% last year.

Business confidence and consumer sentiment in the Czech Republic each deteriorated in February.  From January’s 7-1/2 year high, overall economic sentiment dropped 1.5 points to 12.3.

Norwegian unemployment edged down 0.1 percentage point to 4.5% last quarter.  Finnish producer prices dropped 2.3% in the year to January.

U.S. new home sales, preliminary Markit Economics services PMI, and weekly oil inventories get reported today.

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

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