Oil Swoons, Dollar Firm, and an ECB Policy Meeting

March 9, 2017

West Texas Intermediate crude oil, which closed February above $54 and at 53.20 this past Tuesday, extended its plunge by 2.3% overnight to $49.12, a 3-month low. U.S. inventories are bloated.

Due to a likely Federal Reserve interest rate hike next week and mounting expectations of perhaps three more increases during 2017, the dollar rose overnight by 0.3% against the Canadian and Aussie dollars, 0.4% relative to the peso, 0.2% vis-a-vis the yen, and 0.1% versus the kiwi. The dollar is unchanged against the yuan and sterling and down by 0.2% versus the euro and 0.1% relative to the Swiss franc.

The European Central Bank as expected did not modify its interest rate structure, including a deposit rate of -0.40%, and retained its bond purchase plans. EUR 80 billion of assets will be bought this month. For the remaining nine months of 2017, purchases will be made at a pace of EUR 60 billion per month. Quantitative stimulus could be extended past 2017 if inflation falls short of the path of recovery that has been assumed. ECB President Draghi will hold his customary press conference starting soon.

Ten-year sovereign debt yields rose 2 and 1 basis points in Germany and Japan, and the U.S. Treasury futures is a basis point higher, too. But yields are down 2 bps in Italy and Spain and 1 basis point in France and Britain.

Although Chinese PPI inflation accelerated to a multi-year high of 7.8% in February, consumer prices unexpectedly dipped 0.2% on month, dragging their 12-month increase down to a 25-month low of 0.8% from 2.5% in January.

New Chinese bank loans eased back to a 2-month low of CNY 1.17 trillion. M2 money growth slowed, however, to a 7-month on-year low of 11.1%.

On-year growth in Japanese M2 money and broad liquidity accelerated further to 4.2% and 2.6% in February. But Japanese labor cash earnings growth in January remained at a disappointing 0.5% for a third straight month. Japanese machine tool earnings were 9.1% higher than a year earlier in February. That’s quite an improvement from an 8.9% on-year drop last October.

French business sentiment according to the Bank of France rose to a reading of 104 last month instead of holding level at 102 as analysts were expecting.

Swiss unemployment stayed at a seasonally adjusted 3.3% last month. At the other extreme, Greece ended 2016 with a 23.1% jobless rate.

The British house price balance index compiled by the  Royal Institute of Chartered surveyors printed at 24% in both January and February.

Icelandic real GDP soared 2.6% on quarter and 11.3% on year last autumn. Irish GDP advanced 2.5% on quarter but throttled back to an on-year 5.2% climb. Ireland’s current account swung from a EUR 10.1 billion surplus in 3Q16 to a deficit of EUR 11.1 billion in the year’s final quarter.

Dutch CPI inflation edged 0.1 percentage point higher to 1.8% last month.

U.S. import and export price data and weekly jobless insurance claims will be reported today. Canadian capacity utilization and new home price figures arrive, too, and Peru’s central bank will reveal its latest interest rate decision.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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