Commodity Prices Strengthen, Dollar and Yen Fall

May 15, 2017

Over the weekend,

  • Saudi Arabia and Russia agreed to extend their previously negotiated oil production cut to the end of the first quarter of next year.
  • Finance ministers and central bank chiefs releases a statement after two days of talks in Bari, Italy. See review.
  • IT made some progress combating Friday’s global cyber attack, but tens of thousands of computers around the world remain affected and more attacks are likely.
  • U.S. political talk shows were consumed by the firing of former FBI Director Comey and whether such constitutes a possible obstruction of justice and how this development might affect future legislation.
  • Macron was installed as the new president of France.
  • China unveiled some details for a global infrastructure spending program.

West Texas Intermediate crude oil, up 2.7% to $49.15 per barrel, led the rise in commodity prices. Gold moved 0.3% higher to $1,231.40 per ounce, and industrial metals advanced as well.

The dollar ticked up 0.1% relative to the Japanese yen but otherwise has lost 1.1% against the peso, 0.8% versus the kiwi, 0.7% vis-a-vis the Australian dollar, 0.6% against the loonie, 0.4% versus the euro and Swiss franc, 0.3% against sterling and 0.1% relative to the yuan.

Ten-year British gilt and German bund yields rose three and two basis points. Their Japanese counterpart remained steady.

In stock market action so far today, share prices mostly climbed in Asia led by Hong Kong (+0.9%), although the Japanese Nikkei dipped 0.1%. Equities are down 0.3% in Switzerland and France, however, and by 0.2% in Germany.

The most significant data released today were in China. Retail sales in April were 10.7% higher than a year earlier, down from March’s 10.9% increase and a tad under expectations. Growth in industrial production settled back to 6.5% and also undershot forecasts, as did an 8.9% rise in fixed asset investment for January-April from a year before.

Domestic corporate goods prices in Japan rose 0.2% for the second month in a row, but the 12-month increase accelerated to 2.1% in April from 1.4% in March and -1.2% back in December. Export and import prices fell on month by 1.9% and 2.2%, trimming their on-year increases to 3.0% and 10.9%.

Japanese machine tool orders registered on-year growth of 34.7% in April, up from 22.8% in March, 9.1% in February and 3.5% in January.

New Zealand’s performance of services index dropped 6 points to a 56-month low reading of 52.6 in April. Retail sales in that economy went up 1.5% last quarter and were 4.6% above their year-earlier level.

Australian home loans in March were weaker than assumed, dropping 0.5% on month after declining 0.8% in February.

Dutch retail sales were 3.6% greater than a year before in March.

Portuguese real GDP advanced 1.0% last quarter, more than double expectations and by 2.8% in year-over-year terms. But Greek GDP disappointed with a second straight quarterly contraction albeit of only 0.1% this time.

Several price data releases underscored the subdued inflation situation in Europe. Italian CPI inflation accelerated a half percentage point to 1.9% in April (2.0% in harmonized terms). Finnish consumer prices were 1.0% above their year-earlier level in April. The combined PPI/import price index of Switzerland fell 0.2% on month in April to 0.3% below the January level and a mere 0.8% higher than in April 2016. Danish PPI inflation dropped 0.8 percentage points to 3.5% in April.

The Irish construction purchasing managers index increased 0.5 points to a six-month high of 61.3 in April.

GDP in Thailand grew 1.3% in the first quarter. The on-year growth rate of 3.3% was similar to the prior quarter’s pace.

Scheduled U.S. data releases today include the Empire State Manufacturing index, the National Association of Home Builders’ housing index, and Treasury-compiled capital flows. Canada reports existing home sales.

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

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