Higher Commodity Prices Provide Some Reassurance

March 9, 2016

West Texas Intermediate crude oil rose 2.3% to $37.32 per barrel, setting a less risk averse tone for other markets.

  • Gold fell back 1.0% to $1,249.20 per ounce.
  • 10-year sovereign debt yields rebounded nine basis points in Japan, 7 bps in the U.K., and 3 bps in the United States and Germany.
  • The DOW is up 0.3% so far.  Whereas markets in the Pacific Rim extended the U.S. decline on Tuesday, Europe has seen equities edge up 0.4% in France, 1.0% in Italy, and 0.5% in Germany.  Share prices fell 0.8% in Japan and 1.3% in China earlier.
  • The dollar is up 0.5% against the yen but down 0.9% versus the Aussie dollar, 0.8% relative to the loonie and 0.7% versus the kiwi.

The Bank of Canada left its overnight target interest rate unchanged as expected at 0.5%, claiming developments since the last meeting in January to be along expected lines.  There were two cuts of 25 basis points in 2015, made in January and July of that year.

Bank Negara Malaysia also left  its policy interest rate, which has been at 3.25% since July 2014, unchanged in an expected move.

British industrial production rose 0.3% in January following a 0.2% drop in December.  The increase was led by a 0.7% rise in factory output but did not surpass market expectations.  The NIESR estimates that British GDP rose 0.3% in February.

French business sentiment, according to the Bank of France measure, unexpectedly fell 3 points to a February reading of 98, lowest since November.  Monetary officials felt compelled to revise down projected economic growth for the current quarter from 0.4% to 0.3%. 

Officials in Italy expect Italian GDP to edge up just 0.1% this quarter and to expand only 0.4% in 2016.

U.S. primaries yesterday saw Trump solidify his front-runner status, winning in Michigan, Mississippi and Hawaii.  Cruz took Idaho, and Rubio was the big loser.  On the Democratic side, Sanders unexpectedly beat Clinton in Michigan, albeit by 49.9% to 48.2% of the popular vote.  Clinton won in Mississippi and leads the delegate count by 1,221 to 571.

U.S. mortgage applications bounced up just 0.2% last week after dropping 4.8% previously. 

Japanese machine tool orders posted a bigger 22.6% year-over-year drop in February versus a decline of 17.2% in January and 25.7% in December.

Japanese M2 money growth slowed to 3.1% year over year in February from 3.2% in January, 3.4% in 4Q15, 4.0% in 3Q15 and 3.7% in all of 2015.

The Westpac Australian consumer sentiment index fell 2.2% this month.  Australian home loans decreased 3.9% in January following a 2.7% rise in December.

In the year to February, Mexico’s CPI and PPI respectively climbed by 2.9% and 4.8%.  Brazil posted another double-digit inflation rate in February, this time of 10.36%.

Tomorrow’s big event is the ECB policy announcement and Draghi press conference.  More stimulus is likely.

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

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