Storm Front Coming to the North-Eastern U.S Corridor

March 13, 2017

The coming week was already shaping up to be laden with market-moving developments such as the Fed’s virtually certain interest rate hike and Dutch parliamentary elections, each set for Wednesday. Now comes word that two storm fronts will be merging within 24 hours, creating blizzard conditions and resulting in a foot or more snow in the Boston-Philadelphia corridor. Such a storm this late in the winter is rare but not unprecedented. The costliest snowstorm to hit the Northeast was the blizzard of 1888, which struck March 12 of that year. Big disruptive weather events tend to depress trading┬ávolume and blunt market reaction to usual news.

West Texas Intermediate oil extended last week’s swoon, falling a further 0.8% to $48.09 per barrel. Comex gold is 0.5% higher at $1,207.40 per ounce.

Ten-year German bund and British gilt yields slipped back four and two basis points overnight.

A 1.8% leap in the Hang Seng index of Hong Kong led a rise in Asian stock markets that also included gains of 1.0% in South Korea, 0.8% in China, 0.7% in Taiwan, 0.4% in Singapore and Indonesia and 0.2% in Japan. European equities are pretty flat, however, with increases of 0.2% in the U.K. and 0.1% in Germany but drops of 0.3% in Spain and Italy.

In an otherwise down market for the dollar today, the euro is proving an exception. While it shows a 0.1% downtick against the U.S. currency, the dollar otherwise has slipped 0.4% against the peso and Australian dollar, 0.3% versus the Swiss franc and sterling, 0.2% vis-a-vis the yen and 0.1% against the loonie.

Three Japanese data points were released.

  • Producer prices for goods went up 0.2% in February, doubling their on-year advance to 1.0%. Last year saw PPI deflation bottom out at -4.6% in May. Japanese import prices, which had recorded a 1.1% decline in the year to November 2016, were 11.8% higher in February than a year earlier.
  • The tertiary index, that measures service sector activity, remained weak in January, posting now change versus December’s level, no change compared to last September, and an unchanged 0.7% 12-month rate of increase.
  • Core private machinery orders fell 3.2% in January, a weaker result than assumed, and posted an 8.2% decline from a year earlier. Foreign demand for machinery orders rose 3.2%, however, and were 25.9% greater than in January 2016.

Italian industrial production was weaker than forecast in January, declining 2.3% on month and 0.5% on year. Hong Kong, Romania, and Malaysia also released industrial production figures. Output in the former British colony was 0.8% lower in 4Q16 than a year earlier and fell 0.4% in 2016 as a whole. Romanian output was 5.5% greater than a year before in January, while Malaysian production advanced 3.5% over the same 12-month span.

All remaining capital controls in Iceland imposed during the banking crisis of 2008 are being removed tomorrow.

Swedish unemployment remained steady at a seasonally adjusted 3.9% last month.

In January, Denmark posted a current account surplus of DKK 18.1 billion, some 8% narrower than in December, and Turkey recorded a USD 2.76 billion current account deficit, 25% wider than in January 2016.

New Zealand food prices rose 0.8% on month and accelerated to a 2.2% on-year increase in February.

The Fed will release its monthly labor market conditions index later today, but whatever such indicates, the FOMC almost certainly will be implementing its third 25-basis point hike of the federal funds target for this tightening cycle. The first two such steps were undertaken at meetings held in December 2015 and December 2016.

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

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