Oil Retains $40-Plus Level

April 12, 2016

After closing above $40 per barrel on Monday, West Texas Intermediate crude oil extended its rebound by 0.6% to $40.59.  Investors are hopeful that upcoming talks between OPEC and Russia will yield an accord to freeze production.

Signs of higher inflation contributed to a better investor mood as well.

  • Swedish consumer prices rose 0.5% in March, exceeding expectations and doubling the 12-month rate of climb to 0.8%.  Core inflation advanced 0.4 percentage points to 1.5%.
  • A flash estimate that German consumer prices rose 0.8% on month in March was confirmed, although early Easter, which caused package holiday costs to soar 10.1%, was partly responsible.  On-year inflation bounced up to 0.3% from zero the month before.
  • German wholesale prices rose 0.3% in March, lifted by a 2.0% monthly increase in oil and solid fuel.  The WPI recorded a 2.6% on-year drop.
  • British CPI inflation rose 0.2 percentage points to 0.5% in March, most in 15 months.  Retail price inflation accelerated 0.3 percentage points to 1.6%, and producer output prices recorded their smallest on-year drop (0.9%) since November 2014.  There was also less producer input deflation last month.
  • The British Office of National Statistics also reported lessening house price inflation in February, with a dip to 7.6% from 7.9% in January.

Share prices increased 1.1% in Japan, 0.9% in Australia and Indonesia, 0.6% in South Korea, and 0.5% in Hong Kong and India.  China’s market settled back 0.3%.  In Europe, stocks are up 0.9% in Spain, 0.5% in Germany, 0.3% in France and 0.1% in Britain.

The 10-year British gilt yield rose five basis points, but its Japanese counterpart fell by two basis points.

Currencies reflect less risk aversion as the yen and dollar have softened.  The dollar is down 0.6% against sterling, 0.9% relative to the Australian dollar, 0.4% vis-a-vis the kiwi, 0.2% against the loonie, and 0.1% versus the Swiss franc, but the U.S. currency rose 0.3% against the yen and is unchanged relative to the euro and yuan.  The Swedish krona is firmer.

Comex gold dipped 0.1% to $1,257.09 per troy ounce.  Copper, which had performed poorly recently, rallied.

National Australia Bank’s monthly business confidence index rose three points to +3 in March, best in more than a half year, while the Australian business conditions index climbed four points to +12, which also was the best reading in several quarters.

Japanese machine tool orders posted a 21.2% on-year drop in March, the eighth straight 12-month decline.

Japanese bank loans were 2.0% greater than a year earlier in March, down from 2.2% in the first quarter as a whole and 2.3% in the year to 4Q15.

U.K. same-store retail sales were 0.7% lower in March than a year earlier, the worst 12-month rate of change in seven months.

House prices in the eurozone were unchanged on quarter in 4Q15 but posted a higher 2.9% advance compared with the year-earlier quarter.

U.S. import and export price data are due shortly.  The IMF’s updated forecasts also get released today, and Chile’s latest central bank interest rate decision will be announced.

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

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