Firmer Commodity Prices

May 26, 2016

Crude oil (+0.7%) and a wide spectrum of industrial metal prices firmed overnight.  WTI touched a high of $49.97 per barrel, and brent surpassed $50.00.

St. Louis Fed President James Bullard is the latest Fed official to indicate that a June interest rate hike may be in play.  He spoke of tightening U.S. labor market conditions.

The dollar settled back 0.5% against the loonie, 0.3% versus the Australian dollar and euro, 0.2% relative to the yen, and 0.1% vis-avis the Swiss franc.  The yuan and kiwi are steady, and sterling has firmed 0.1%.

In the Pacific Rim, share prices jumped 1.9% in India and rose 0.5% in New Zealand, 0.3% in China and Australia, 0.2% in Singapore and Indonesia and 0.1% in Japan.

In Europe, the German Dax and Paris Cac are so far up 0.4%, but equities have lost 0.6% in Spain, 1.0% in Greece and 0.2% in Italy.  The British Ftse is 0.2% firmer.

The 10-year Japanese JGB yield fell four basis points to -0.13%, while its German and British counterparts edged up a basis point.

British GDP rose 0.4% in the first quarter, down from 0.6% growth in the final quarter of 2015, and was 2.0% higher than a year earlier, down from first quarter-over-first quarter increases of 2.6% in 2015 and 2.8% in 2014.  Although service sector activity climbed 0.6% last quarter, manufacturing contracted 0.4%, and construction fell by 1.0%.  Business investment and exports fell 0.5% and 0.3% on quarter, while personal consumption rose 0.7%. 

The British Bankers Association’s estimate of 40,104 mortgage approvals in April constitutes the smallest number since March 2015.

Swiss industrial production rose only 1.0% on year in the first quarter.

Italian retail sales recorded a 0.6% month-on-month drop in March, most since May 2014, but sales were 2.2% higher than a year earlier.  Italian wage inflation last month slowed to 0.6%.

Spanish real GDP increased 0.8% in 1Q16 and was 3.4% greater than in 1Q15.

Swedish economic sentiment in May was weaker than forecast and below April levels.  Consumer confidence dropped 0.6 points to a reading of 96.0, and manufacturing fell 1.9 points to 105.3.  Economic sentiment scored 102.2, down form 104.0.  Sweden’s trade surplus in April, SEK 4.4 billion, was larger than SEK 3.9 billion the month before and SEK 3.5 billion a year earlier.  Finally, Swedish producer prices dropped 4.2% in the year to April.

Japanese corporate service prices slipped 0.2% on month in April, keeping the 12-month rate of change at 0.2% for a third straight month.  Japanese stock and bond transactions generated a net JPY 334 billion capital outflow last week, somewhat less than the outflow of JPY 550 billion in the prior week.

The National Bank of Ukraine Board cut its key interest rate by 100 basis points to 18%.  Prior to a 300-bp reduction last August, such was at 30%.  Board officials will be easing the tight policy further if inflation continues to ease.  A recovery of the hryvnia helps.

South Korean consumer confidence slipped to 99 in March from 101 in April and a reading of 100 in March.  Industrial production in Singapore rose 4.8% in April versus March.  Hong Kong’s trade deficit of HKD 31.0 billion was smaller than the deficits of HKD 47.0 in March and HKD 39.2 billion a year earlier.

Scheduled U.S. data reports today include durable goods orders, pending home sales, the K.C. Fed manufacturing index, and weekly jobless insurance claims.  On Friday, Japan reports consumer prices, and Fed Chair Yellen delivers a speech at Harvard.

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

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