Daily Market Outlook by Solid Trust Markets

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Recession Unlikely as Market Fears Looms

GBP/USD is currently trading at about 1.4507, GBP/EUR is trading at about 1.2850 as the #market opens up this Friday morning, so Sterling is a little bit higher against the U.S. Dollar and also a little bit higher against the Euro and after the nadirs that it saw yesterday – fresh cut (13-month lows in GBP/EUR).

We saw interest rate expectations further kicked out along the curve after a very volatile day in markets yesterday. Some interest rate markets pricing in a full 25 basis point cut by the Bank of England within the next 12-months. We also saw for instance the #Federal Reserve see no interest rate cuts through 2016 and through 2017, but those have repaired themselves a little bit, but even so markets are quite volatile – certainly were volatile yesterday.

Furthermore, markets have calmed a little bit this morning, and you’ll have to believe that if we continue to see these calming through the next couple of weeks, certainly the impact the #stock market moves have had on the real economy would be quite slight, though no economic indicators out there are really pointing towards a recession at the moment, it is purely #financial market getting a little bit of the tizzy at the moment.

Going forward, we’re likely to see the desire for have trades slack it off a little bit and when we at #CSFX say that we mean demand for the #Euro, the Japanese #Yen and demand for government bonds and therefore things like equities and hopefully Sterling should repair themselves from here.

Obviously, there’s a lot of ifs within the sentence above, but if you like us at #Capital Street Research Desk believe that the movements that we’ve seen are purely down to banking shares and not due to the #economic fundamentals in the world economy, then that’s where we should be looking for gains sooner rather than later.

Data wise today, thing are going to be fairly quiet, but we may see quite a volatile afternoon session as people expect obviously #China to come back into markets on Sunday night, following the Lunar New year Holiday, but also it is President’s Day in the United States on Monday and therefore a lack of #liquidity there as well.

 

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Daily Market Outlook

The Federal Reserve's rate path "dot plot" has become increasingly detached from financial markets' interest-rate projections and risks sending an overly hawkish message that may undermine the central bank's credibility. Despite falling inflation expectations and turmoil in financial markets this week as concerns about growth mounted, the Fed hewed to its message that it could build on December's rate rise with further hikes in 2016. Both Fed Chair Janet Yellen and New York Fed Chief William Dudley suggested this week that rate rises were still on the cards, pointing to the underlying health of the U.S. economy. Neither referred directly to the "dot plot" that envisages four rate hikes this year, versus market pricing of a one in three chance of even a single rate rise this year. Fed officials say that while the dots, issued every quarter, do not represent a rate path per se, they can be used to manage expectations. Prior to Yellen's appearance this week in Congress, she had not spoken since signing off on the December rate rise. She has no listed speaking engagements until the March Federal Open Markets Committee meeting - a gathering the Fed had wanted to keep on the cards for a potential rate rise.

Japan's economy shrank more than expected in the final quarter of last year as consumer spending and exports slumped, adding to headaches for policymakers already wary of damage the financial market rout could inflict on a fragile recovery. Gross domestic product contracted by an annualized 1.4 percent in October-December, bigger than a market forecast for a 1.2 percent decline and matching a fall marked in the second quarter of last year, Cabinet Office data showed on Monday. It followed a revised 1.3 percent increase in the previous quarter. The data underscores the challenges premier Shinzo Abe faces in dragging the world's third-largest economy out of stagnation, as exports to emerging markets fail to gain enough momentum to make up for soft domestic demand. Market speculation of additional monetary easing simmers, although the Bank of Japan's policy ammunition appears to be dwindling, analysts say, after it deployed negative interest rates last month. Instead the data showed that private consumption, which makes up 60 percent of GDP, fell 0.8 percent, exceeding market forecasts of a 0.6 percent decline. Exports fell 0.9 percent in October-December after rising 2.6 percent in the previous quarter, underscoring the pinch companies are already feeling from soft emerging market demand.

Brent and U.S. crude futures edged down on Monday as a strong dollar weighed on prices, paring gains from a more than 10-percent jump late last week that came amid renewed talk that OPEC might finally agree to cut output to reduce a world glut. The mood inside the Organization of the Petroleum Exporting Countries (OPEC) is shifting from mistrust to a growing consensus that a decision must be reached on how to end the global oil price rout, Nigeria's oil minister said, adding he will have talks with his Saudi and Qatari counterparts. Iran is exporting 1.3 million barrels a day (bpd) of crude oil, and will be pumping 1.5 million barrels a day by the start of the next Iranian year on March 20, a vice-president was quoted as saying on Saturday. Iran will load 4 million barrels of crude oil on tankers destined for Europe in the coming 24 hours, a senior official was quoted as saying on Saturday, including 2 million barrels to be bought by France's Total. Amid worries over slowing global demand, China's exports, denominated in yuan, fell 6.6 percent in January from a year earlier, while its yuan-denominated imports dipped 14.4 percent, trade data showed on Monday.

The U.S. dollar rose from a 15-month low against the yen and also gained against the euro on Monday helped by a bounce in U.S. consumer spending last month. The dollar regained ground on Friday after forecast beating U.S. retail sales figures for January supported the view that the Federal Reserve is likely to stay on a tightening path as other world central banks ease monetary policy. The Commerce Department said retail sales rose 0.2% last month, beating expectations for an increase of 0.1%. Retail figures used to calculate gross domestic product, which excludes cars, fuel, building materials and food services, rose 0.6% in January after a 0.3% fall in the previous month.

 

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Daily Market Outlook

Asian shares were taking a breather on Wednesday, looking to consolidate two sessions of solid gains as risk appetites finally showed some resilience to the latest selloff in oil prices. A welcome break from weeks of turbulence saw the safe havens such as the yen and sovereign bonds ease just a little, though investors face a test later in the day when the Federal Reserve releases minutes of its last policy meeting.cA survey of global fund managers found they had become so cautious they were holding more cash than at any time since late 2001, an "unambiguous buy" signal according to Bank of America Merrill Lynch. Markets now await minutes of the Federal Reserve's last meeting to judge the balance of opinion among policy makers on the prospect of further rate hikes. ed Chair Janet Yellen last week left open the chance of a move in March but also noted concerns about China and the impact of turmoil in global financial markets. Investors have already priced out March and see scant chance of a hike at all this year, which makes that consensus vulnerable to any hint of hawkishness in the minutes. Data on Tuesday showed that German economic sentiment fell sharply this month, amid concerns over falling oil prices, slowing global growth and heightened market volatility. The ZEW index of German economic sentiment fell to 1 this month from 10.2 in January, but was still slightly better than economists’ forecasts for a reading of zero.

Sterling was stuck at $1.4295, having shed 1 percent against the dollar on Tuesday The big loser was sterling, which has struggled so far in 2016 because of worries the UK might leave the euro zone. Traders said UK markets face a pivotal week ahead of a two-day summit starting on Thursday at which Prime Minister David Cameron will try to persuade other leaders to support a deal to keep Britain in the European Union. Separately, the U.K. Office for National Statistics said the rate of consumer price inflation rose by 0.3% last month, matching forecasts and up from 0.2% in December. Core CPI, which excludes food, energy, alcohol, and tobacco costs rose at a rate of 1.2% last month, below forecasts for 1.3% and down from 1.4% in December.

The Federal Reserve should be "unhurried" as it considers when to again raise interest rates given problems overseas and financial market volatility that will likely dampen already low U.S. inflation, a top Fed policymaker said on Tuesday. Going a step further than cautious comments he made last month, Boston Fed President Eric Rosengren stressed that the U.S. central bank would need to ratchet down economic forecasts it made in December because oil prices have continued to fall amid turbulent markets and a global economic slowdown. Future economic growth is now "somewhat more uncertain" given that "recent global events may make it less likely" inflation will rise to the Fed's 2 percent target as quickly as U.S. central bank officials predicted in mid-December, Rosengren said.

The dollar erased losses against the other major currencies on Tuesday, despite the release of disappointing manufacturing activity from the New York area as investors continued to focus on the oil market. The Federal Reserve Bank of New York said that its general business conditions index improved to -16.7 this month from a reading of -19.4 in January. Analysts had expected the index to rise to -10.0 in February.

Crude oil futures rebounded on Wednesday on investor hopes that a deal between Saudi Arabia and Russia to freeze oil output at January levels would lead to a wider pact among producers that could eventually see production cuts to support prices. Top oil producers Russia and Saudi Arabia on Tuesday agreed to limit oil production at January levels, provided other oil exporters joined in, but stopped short of agreeing cuts in oil output. Iraq, Qatar and Venezuela said they would freeze output at January levels provided a deal could be agreed, while OPEC member Iran could be offered special terms to freeze oil production levels, sources said. Oil prices initially surged on Tuesday on news of the deal but early gains were wiped out by the realization that there would be no immediate supply cuts to tackle global oversupply. "The market is coming around to the idea that it is not bad news, but not as good news as it was anticipating," he said, adding that investors were hoping for production cuts. Investors are also eyeing U.S. oil inventory data later on Wednesday for further direction on oil prices. U.S. crude stocks rose by 3.9 million barrels to 505.9 million barrels in the week to Feb. 12, according to a Reuters poll of analysts on Tuesday.

 

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Daily Market Outlook 18 Feb 2016

Asian stocks rose across the board on Thursday as crude oil extended gains on hopes that big producers will cap output, improving investor sentiment for riskier assets. Spread betters expected a mixed open for European shares, with Britain's seen dipping on some nervousness as British Prime Minister David Cameron holds "now or never" talks to keep his country in the European Union. Minutes of the January Federal Open Market Committee (FOMC) meeting released on Wednesday showed that policymakers worried about tighter global financial conditions hitting the U.S. economy and considered changing their planned path of interest rate hikes in 2016. In currencies, the greenback dipped against the yen and euro on dovish comments from a top Fed official. It would be "unwise" for the central bank to continue hiking rates given declining inflation expectations and recent equity market volatility, St. Louis Fed President James Bullard said late on Wednesday in comments that mark a stark change of direction for one of the Fed's more hawkish inflation foes. As the Fed embarked on its first rate hike in a decade late last year, the prospect of higher interest rates weighed on non-yielding gold and pushed prices to near six-year lows. But the metal rebounded to a one-year high of $1,260.60 an ounce last week in the wake of the turmoil in global markets.

U.S. industrial production in January rose by the most in 14 months as manufacturing and utilities output increased, the latest sign the economy regained some ground early in the year. While other data on Wednesday showed a surprise decline in housing starts last month that was probably because of bad weather, especially in the Northeast and Midwest regions of the country. With building permits ahead of groundbreaking activity, home construction is likely to pick up in the months ahead. The first increase in industrial output in five months should help allay the fears of a recession that have roiled the stock market and eliminated bets for an interest rate hike from the Federal Reserve in March. The chances of an increase in borrowing costs this year hang in the balance. Industrial production jumped 0.9 percent last month, the largest gain since November 2014, the Fed said. The increase followed a 0.7 percent decline in December and was boosted by a 0.5 percent advance in manufacturing output. The rise in manufacturing production reflected gains in the output of long-lasting goods such as machinery, furniture and primary metals. Motor vehicle assembly accelerated. The production of food, textiles and chemicals also rose. But manufacturing is not out of the woods and will continue to be buffeted by a strong dollar, weak global demand and lower oil prices. Industrial output was also buoyed by a 5.4 percent surge in utilities production as the return to normal winter temperatures saw a jump in demand for heating. Mining output was flat after four straight months of hefty declines that averaged about 1.5 percent per month. Minutes of the Fed's Jan. 26-27 policy meeting published on Wednesday showed officials were concerned about slowing global growth and the equities rout, and considered changing their planned path of interest rate increases in 2016. The economy grew at a 0.7 percent annual pace in the fourth quarter. Forecasting firm Macroeconomic Advisors raised its first-quarter GDP growth estimate by one-tenth of a percentage point to a 2.1 percent rate on the industrial production data.

Japan's central bank governor on Thursday said the bank's adoption of negative interest rates was not directly aimed at weakening the yen, dismissing wider criticism that the policy was a failure amid a surge in the local currency. The Bank of Japan stunned markets by deploying negative interest rates last month to prevent financial market volatility from hurting business confidence and delaying an exit from deflation. The move, however, has failed to override a wave of global risk-aversion that has sent global stock markets into a slump and bolstered appetite for the safe-haven yen. BOJ Governor Haruhiko Kuroda said policy objectives around price and currency stability were not the same thing in large economies like Japan. He also blamed persistent market volatility on investors' concerns over China's slowdown, slumping oil prices and banking-sector woes in Europe.

 

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Daily Market Outlook 19 Feb

China's yuan inched down against the dollar on Friday after the central bank fixed a slightly softer midpoint, but looked set for a solid weekly gain. Data published by the Chinese central bank late on Thursday indicated its foreign exchange assets, a barometer of currency flows resulted from central bank intervention in the foreign exchange market, decreased by 644.5 billion yuan ($99 billion) in January, its second biggest monthly fall.

The euro fell to as low as 125.34 yen EURJPY= on Friday, a low last seen in June 2013, and last traded at 125.56 yen. The minutes from the European Central Bank's January meeting showed some policymakers are advocating the need to act pre-emptively in the face of new threats on the economy. A big focus is on the British pound and the EU summit in Brussels, where UK Prime Minister David Cameron is seeking more favorable terms for its EU membership. A successful deal there is expected to lead to a referendum on EU membership as soon as in June.

The number of Americans filing for unemployment benefits unexpectedly fell last week, pointing to labor market strength that keeps Federal Reserve interest rate hikes on the table this year. Other data on Thursday showed factory activity in the mid-Atlantic region contracting at a slower pace in February and hinted at a pick-up in wage growth. But the signs of stabilization in the struggling manufacturing sector were tempered by further declines in new orders and employment. Economists had forecast claims rising to 275,000 in the latest week. The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 8,000 to 273,250 last week. In a second report, the Philadelphia Federal Reserve said its business activity index increased to a reading of -2.8 this month from -3.5 in January. The index has been now been negative for six consecutive months. St. Louis Fed President James Bullard, a voting member of the Fed's policy-setting committee this year, said on Wednesday it would be "unwise" to continue raising rates, given the recent stock market turmoil and falling inflation expectations. Claims are being closely monitored for signs of a pick-up in layoffs in the wake of the recent massive stock market sell-off. There is no indication so far that companies have responded to the tighter financial market conditions by reducing headcount. The four-week average of claims declined by 12,000 between the January and February survey periods, suggesting acceleration in job growth. Nonfarm payrolls rose by 151,000 in January. Economists said the drop in claims during the survey was consistent with job gains of about 200,000 in February. The economy is being buffeted by a strong dollar and weak global demand, which have undercut manufacturing. Sharp spending cuts by energy firms in response to lower oil prices, and business efforts to sell off inventory have also hurt growth. The Philadelphia Fed survey showed factories in eastern Pennsylvania, southern New Jersey and Delaware continued to report shrinking orders and inventories this month. While shipments grew, the pace slowed significantly from January and delivery times were even shorter than in the prior month.

Oil futures fell in Asian trade on Friday as a record build in U.S. crude stocks stoked concerns about global oversupply, outweighing moves by oil producers including Saudi Arabia and Russia to cap oil output. U.S. crude inventories rose by 2.1 million barrels last week, to a peak of 504.1 million barrels, the third week of record highs in the past month, data from the U.S. government's Energy Information Administration (EIA) showed on Thursday. That came as Iraq's oil minister Adel Abdul Mahdi said on Thursday that talks would continue between OPEC and non-OPEC members to find ways to restore "normal" oil prices following a meeting on Wednesday. A combination of increased global oil demand of between 1-2 million barrels per day, production cutbacks by non-OPEC members and the deal by producers to cap output could lead oil prices to climb to around $40 a barrel by year-end, Nunan said. Oil prices rose more than 14 percent in the three days to Thursday after Saudi Arabia and Russia, supported by other producers including Venezuela and Iraq, moved to freeze oil output at January's levels. Iran endorsed the plan without commitment on Wednesday. If approved, it would be the first such deal in 15 years between the Organization of the Petroleum Exporting Countries and non-OPEC members.

 

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Daily Market Outlook 22 Feb 2016

Asian share markets edged cautiously higher on Monday as investors awaited a rush of February industry surveys to take the pulse of the global economy, while sterling suffered on concerns the UK might yet vote to leave the European Union. A busy week for data culminates with a Group of 20 meeting that offers leaders a chance to soothe market concerns with talk of coordination, even if it produces nothing concrete.

Growth in Japan's manufacturing activity slowed sharply in February as new export orders contracted at the fastest pace in three years, a worrying sign that overseas demand is deteriorating rapidly as China's economy slows, a preliminary survey showed on Monday. The Markit/Nikkei Flash Japan Manufacturing Purchasing Managers Index (PMI) fell to 50.2 in February on a seasonally adjusted basis from a final 52.3 in January. But it remained above the 50 threshold that separates contraction from expansion for the 10th consecutive month. Exports in January tumbled by the most since the global financial crisis, in a clear indication that financial market turmoil and slowing emerging market economies have eroded demand abroad. Under pressure from faltering global demand, total new orders from customers at home and overseas also changed direction and contracted, while job creation cooled to a five-month low.

With next week's calendar full of economic data releases and speeches by economic policymakers, investors have been poised to watch the Federal Reserve for clues about the U.S. central bank's next move, but an unexpectedly hot reading on inflation on Friday will further sharpen that focus. After coming into 2016 with an expectation of three or four interest rate hikes through the year, market participants recently were viewing the Fed as likely raising interest rates once, if at all, in light of weak inflation and global volatility. The uptick in price pressures has already shifted the market's expectations on the Fed's next move. The incoming data gives more weight to next week's scheduled speeches from many Fed officials, including Vice Chair Stanley Fischer on Tuesday and Atlanta Fed President Dennis Lockhart on Thursday as markets look for a change in tone. Two Fed surveys of business conditions, Richmond and Kansas City, are also out next week. The Fed's policy-setting committee next meets March 15 and 16 in Washington, with a statement followed by a news conference with Chair Janet Yellen.

The dollar was underpinned by data last Friday that showed underlying U.S. inflation, rose in January by the most in nearly 4-1/2 years to a 2.2 percent annualized rate. It drew particular attention as the number was above the Fed's 2.0 percent target, though it is not the central bank's benchmark inflation measure. The figures should support the view that the Fed could gradually raise interest rates this year as forecast, though markets remained highly skeptical given the backdrop of slowing global growth and market turbulence. Finance ministers and central bank governors from the Group of 20 rich nations gather in Shanghai this week to discuss those global headwinds. There has been some chatter about a possible grand currency agreement that would allow for depreciation in the U.S. dollar, which might relieve pressure on commodity prices and on emerging markets. However, most analysts consider it very unlikely given so many of the G20 central banks are actively easing policy and need their own currencies to stay competitive.

Oil prices partly recovered on Monday following steep losses in the previous session, supported by a fall in the number of U.S. production rigs in use, but analysts said general oversupply was keeping the market weak. A falling rig count in the United States which is expected to lead to a decline in 2016 production helped support prices, analysts said. "The U.S. oil rig count continued to decline..., with a total of 26 rigs idled," Goldman Sachs said in a note to clients. "The current rig count implies... annual average U.S. production would decrease by 445,000 barrels per day yoy (year-on-year) on average in 2016," it added. Record U.S. crude stocks of 504.1 million barrels pulled back gains from last week's relief rally on the announcement of a production freeze by Russia and the Organization of the Petroleum Exporting Countries (OPEC). With production outpacing demand by 1 million to 2 million barrels every day, crude prices have fallen around 70 percent since mid-2014. Analysts also said that some producers seemed to show little commitment to a deal reached by Russia and OPEC leader Saudi Arabia, and supported by Qatar and Venezuela, to freeze output at January levels.

 

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Daily Market Outlook 23 Feb

Oil markets jumped as much as 7% on Monday as speculation about falling U.S. shale output fed the notion that crude prices may be bottoming after their 20-month collapse. But they retreated on Tuesday on concern that any cuts to U.S. production may be countered by rising output from Iran. Short-covering in oil began last week after Saudi Arabia and fellow OPEC members Qatar and Venezuela agreed with non-OPEC member Russia to freeze output at January's highs. But while the market seems to like the fact that top producers are starting to take action to rein in supply, it "remains questionable' whether such moves will have a real impact, he said. Oil futures fell more than 1 percent on Tuesday amid worries rising Iranian output would deepen a global crude oversupply, offsetting expectations of a drop in U.S. production that had spurred sharp price gains in the prior session.

Key oil exporters, led by Saudi Arabia and Russia, have proposed to freeze output at January levels, but only if others joined in. While Iran, now free of international sanctions that hurt its oil trade, has welcomed the move, the country has stopped short of pledging to act itself. It is thus unclear whether the freeze will actually happen. The drop in benchmark prices is partly due to the prospect of rising Iranian production prolonging the world oversupply, analysts said. Globally, 1-2 million of barrels of crude are currently estimated to be produced daily in excess of demand. Oil prices jumped more than 5 percent on Monday, buoyed by projections from the IEA, the world's oil consumer body, that U.S. shale oil production could fall by 600,000 bpd this year and another 200,000 bpd in 2017. The IEA, however, said in the longer term, U.S. production would also recover on improving cost efficiency, lifting output to a record 14.2 million bpd by 2021, compared with a peak of over 9.5 million bpd in 2015. The expected resurgence of U.S. shale oil production will cap a recovery in the coming years in the price of oil, which is expected to reach $80 per barrel by 2020, IEA Director Fatih Birol said at a news conference in Houston, Texas.

The Federal Reserve's top markets official warned on Monday that a trend of U.S. money market firms converting funds from "prime" to "government-only" could be sharply reversed and harm the overall execution of policy when a new Fed tool is eventually dismantled. In a speech on tools the U.S. central bank adopted to wrench interest rates from near zero in December, New York Fed markets chief Simon Potter warned money funds that one of those tools, an overnight repurchase facility known as ON RRP, is only temporary. The Fed's policy-making committee took the aggressive step in December of backing the ON RRP facility with up to $2 trillion in bonds, which many investors took as a signal that it would remain in place for some time. But the Fed has long said the tool would only be used as long as it was necessary to keep lifting rates off the floor.

The dollar remained broadly higher against the other major currencies on Monday, hovering close to two-week highs as hopes for additional U.S. rate hikes this year continued to support the greenback. The euro weakened after research group Markit said that its Flash Euro Zone Composite Output Index, which measures the combined output of both the manufacturing and service sectors dropped from 53.6 in January to 53.0 in February, a 13-month low and below forecasts for 53.3. The report came shortly after data showing that French private sector activity slid into contraction territory last month, while business activity in Germany grew at the slowest pace in seven months. The data added to pressure on the ECB to step up measures to bolster growth in the region. Sterling came under broad selling pressure after London Mayor Boris Johnson’s shock decision to back a campaign for Britain to exit the European Union. British Prime Minister David Cameron reached a deal with EU leaders on Friday giving Britain a special status in the bloc, which paved the way for him to call a referendum on EU membership on June 23. But on Sunday London’s Mayor Boris Johnson said he would be supporting the campaign to leave, arguing it is a chance "to vote for real change".

 

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Daily Market Outlook 24 Feb

Asian shares fell on Wednesday as oil prices skidded after Saudi Arabia effectively ruled out production cuts by major producers anytime soon, sending investors into safe-havens such as the yen. The toll from low oil prices is also spreading to banks that have exposure to the energy sector, as roughly a third of U.S. shale oil producers are at high risk of slipping into bankruptcy this year, according to a study by Deloitte. JP Morgan (JPM.N) said it will increase provisions for expected losses on energy loans by $500 mn, or more than 60 percent of its existing reserves. The franc got a lift also as the head of its central bank warned it could not "endlessly" take further steps to ease monetary conditions. The euro in contrast was hit by a key index on German business climate showing sentiment among German manufacturers plunged by its largest amount since the bankruptcy of Lehman Brothers in 2008.

Oil prices slid on Wednesday, extending sharp falls from the previous session after top exporter Saudi Arabia ruled out production cuts and industry data showed a further build in U.S. crude stockpiles. Meanwhile, Iran made clear it has no interest in restraining production after sanctions against it were lifted, calling a joint Russian/Saudi proposal for major exporters to freeze output "laughable". The falls were a result of an apparent lack in cooperation among members of the Organization of the Petroleum Exporting Countries (OPEC) to freeze or cut production and rein in overproduction that has pulled down prices by 70 percent since mid-2014. Saudi Arabia's oil minister Ali Al-Naimi said on Tuesday that a coordinated production cut by OPEC and non-OPEC exporters was "not going to happen because not many countries are going to deliver". He also said that a proposed freeze in output at January levels, which were near record highs, would require "all the major producers to agree not to add additional barrels". While non-OPEC giant Russia has tentatively agreed on freezing its output at January levels, when they hit a post-Soviet record, Iran called the proposal "laughable". "So they should freeze their production at 10 million barrels and we should freeze ours at 1 million barrels - this is a laughable proposal," he said. Singapore-based brokerage Phillip Futures said it expected crude prices to trade in a range of $28 to $36 per barrel in the coming months. Between 1 mn and 2 mn barrels of crude are currently produced every day in excess of demand, leaving storage facilities around the world brimming with unwanted supplies. The API said crude inventories raised 7.1 mn bbl in the week to Feb. 19 to 506.2 mn, far exceeding expectations of a 3.4 mn bbl rise. The U.S. EIA will report official inventory data later on Wednesday.

It is still unclear whether the recent downturn in global financial markets will have any substantial impact on the U.S. economy, Federal Reserve Vice Chairman Stanley Fischer said on Tuesday, suggesting the episode may still pass without much effect on the Fed's plans. "If the recent financial market developments lead to a sustained tightening of financial conditions, they could signal a slowing in the global economy that could affect growth and inflation in the United States," Fischer said at an energy industry gathering in Houston. The volatility in global markets since the Fed began tightening rates in December has led many investors to discount the likelihood of a second Fed move anytime soon, with the upcoming March meeting all but ruled out. Fischer did not speak directly to the point. But he did indicate that there was no rush, and in particular repeated that he feels it would be "appropriate" if the economy ran at more than full employment for a period of time.

U.S. home resales unexpectedly rose in January, reaching a six-month high, in the latest sign that the economy remains on firmer ground despite slowing global growth and tightening financial market conditions. The housing market strength was echoed by other data on Tuesday showing a solid rise in house prices in the year to December. But the economic outlook was tempered by a fall in consumer confidence this month amid a stock market rout. The National Association of Realtors said existing home sales increased 0.4 percent to an annual rate of 5.47 million units, the highest level since July. January's sales pace was also the second highest since 2007. The unemployment rate is currently 4.9 percent but is expected to fall lower. Estimates of the unemployment rate that would put pressure on inflation range close to 4 percent at the low end.

 

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Daily Market Outlook for 25 Feb

Asian shares got off to a shaky start on Thursday as investors remained cautious in the face of a fragile recovery in volatile crude oil - a source of much of the recent anxiety about the health of the global economy. Investors awaited China's yuan fixing, after the central People's Bank of China set its currency's midpoint rate CNY=SAEC at a softer 6.5302 per dollar on Wednesday. Authorities continued to focus on stabilizing the currency through state banks' buying activity. China's industrial output will grow at around 6 percent in 2016, the Ministry of Industry and Information Technology said. Industrial output will stabilize this year and there may be a deeper divide between the industrial outputs of different regions and industries, the ministry said in a statement accompanying a press conference.

U.S. data on Wednesday showed the services sector contracted in early February for the first time since October 2013, suggesting a weakening of economic conditions outside the troubled manufacturing and energy industries. New U.S. single-family home sales, though the overall housing market recovery remains intact. The Commerce Department said single-family home sales dropped 9.2 percent last month to a seasonally adjusted annual rate of 494,000 units, almost unwinding December's sharp increase. Economists had forecast new home sales, which account for 8.3 percent of the housing market, slipping to only a 520,000 unit-rate last month. Sales in the West, which has seen a steep rise in home prices because of tight inventories, plummeted 32.1 percent to their lowest level since July 2014. The percent decline was the largest since May 2010. Last month, the inventory of new homes on the market increased 2.1 percent to 238,000 units, the highest since October 2009. Still, housing stock remains tight. In a separate report, data firm Markit said its flash U.S. services PMI business activity index fell to 49.8 early this month from a reading of 53.2 in January. A reading below 50 indicates a contraction in services sector activity.

Dallas Federal Reserve President Robert Kaplan said on Wednesday that he does not expect the United States to enter recession this year. Slowing global growth, tightening financial conditions and the U.S. Treasuries yield curve are chief among the factors he is analyzing in determining whether to support further rate hikes this year, Kaplan told an audience at an event in Dallas. Kaplan is among Fed policymakers advocating a patient and cautious approach to policy tightening in the wake of global headwinds. The Federal Reserve must act to stop inflation expectations from getting too low, St. Louis Fed President James Bullard said on Wednesday, reiterating his concerns about continuing to raise interest rates. The U.S. central bank cannot let low inflation expectations "get out of hand," he told a dinner of bond traders here, adding he "can't stomach" currently low readings. "It's just that they've fallen so far that it's got to be a concern." Bullard said that if the U.S. economy faces a "bigger shock," the Fed has several policy tools at its disposal, but turning to so-called negative rates is unlikely. "There's too much talk about negative rates," he said.

Crude oil prices fell in Asia on Thursday as marginal U.S. shale oil producers are in sharper focus for production or operations cuts. On Wednesday morning, the U.S. EIA said in its Weekly Petroleum Status Report that U.S. commercial crude inventories for the week ending on February 19 rose by 3.5 million barrels from the previous week. At 507.6 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. While the total slightly exceeded analysts' expectations for a 3.2 million build, it fell considerably below the API's estimates of a 7.1 million barrel increase on Tuesday evening. At the Cushing Oil Hub in Oklahoma, inventories rose by 333,000 barrels to surge above 65 million, reaching a fresh record-high. It marked the 15th build at the nation's largest storage facility in the last 16 weeks. Storage levels at Cushing, the main delivery point for Nymex oil, are dangerously close to reaching full-capacity. Meanwhile, crude production in the lower 48 states fell sharply by 196,000 bpd on the week representing the fifth straight week of declines. Overall, U.S. output dipped by 33,000 to 9.102 million bpd, also moving lower for the fifth consecutive weekly period. U.S. production continues remains far below its June level of 9.5 million bpd when it soared to its highest level in at least 40 years. Investors continued to digest bearish comments from Ali al-Naimi during the previous session, when the Saudi Arabian oil minister provided further assurances that the kingdom will under no circumstances slash its production levels, at least for the time being. Last week, Saudi Arabia, Russia and two other OPEC members agreed in principle to freeze their production at their respective January levels. Separately, Iran oil minister Bijan Zanganeh reportedly called the deal "a joke," on Tuesday, while blaming his rivals for placing "unrealistic demands," on his country.

 

[SolidTrustMarket]

Daily Market Outlook 26 Feb

Asian shares made guarded gains on Friday as a gathering of world finance leaders provided a welter of reassuring comments, but little in the way of actual policy stimulus. Setting the tone for the Shanghai meeting of the Group of 20, China's central bank chief, Zhou Xiaochuan, said Beijing still had the room and tools to support the world's second largest economy. Yet, German Finance Minister Wolfgang Schaeuble was quick to declare that the scope for monetary and fiscal policy was exhausted globally and called for more structural reform. The S&P 500 had already scored its highest close since early January after oil staged a turnaround to end Thursday 3 percent higher on speculation a March meeting of major producers might stabilize prices. With the recent market turbulence front and center, the G20 is under pressure to agree a coordinated stimulus program that could stop a global slowdown from turning into something worse.

Europe would seem to need the help as long-term inflation expectations fell to record lows, piling pressure on the European Central Bank for more aggressive easing. That kept the euro pinned at $1.1045 EUR= and far from the February top of $1.1375. The dollar was steady on the yen at 112.87 JPY=, almost two yen higher from this week's trough. Sterling was still nursing its wounds near a seven-year low against the dollar GBP= and on track for its heaviest weekly fall since 2009 on worries about a possible British exit from the European Union.

Crude oil prices dipped in early trading on Friday as reports of a meeting by oil producers to freeze output failed to convince traders that enough effort was being made to rein in ballooning global oversupply. The drop in prices came after oil markets rose late on Thursday on the back of strong U.S. gasoline demand and what ANZ bank called a "perennial hope that OPEC members can coordinate supply". That hope was stoked by reports that OPEC-members Saudi Arabia, Qatar and Venezuela, as well as non-OPEC producing giant Russia, would meet in March to discuss capping crude oil production at January levels. Iran is hoping to increase its crude exports by 1 million barrels per day within the next year after international sanctions against it were lifted in January. The sanctions had cut Iran's exports by more than half from a pre-sanctions peak of almost 3 million barrels per day in 2011. Despite the glut, prices did receive some support this week from strong demand for gasoline, especially in the United States.

New orders for long-lasting U.S. manufactured goods in January rose by the most in 10 months as demand picked up broadly, offering a ray of hope for the downtrodden manufacturing sector. While other data on Thursday showed new applications for unemployment benefits increased last week, they remained below levels associated with a tightening labor market. The reports should help calm fears of a recession that have spooked investors on the stock market. The Commerce Department said orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, surged 4.9 percent last month, reversing December's 4.6 percent plunge. January's increase was the largest since March and beat economists' expectations for only a 2.5 percent rise. The report also added to data on retail sales, employment, existing home sales and industrial production in suggesting that the economy regained its footing at the start of the year after stumbling in the fourth quarter. Manufacturing, which accounts for 12 percent of the U.S. economy, remains constrained by a strong dollar, weak global demand and capital spending cuts by oilfield service firms like Schlumberger and Halliburton following a plunge in oil prices.

 

[SolidTrustMarket]

Daily Market Outlook for 4 March

U.S. employers likely stepped up hiring in February, in a sign of labor market strength that could further ease fears the economy is heading into recession and allow the Federal Reserve to gradually raise interest rates this year. Nonfarm payrolls probably increased by 190,000 jobs last month in the U.S. Labor Department's report due on Friday, with the unemployment rate holding at an eight-year low of 4.9 percent, according to a Reuters survey of economists. The labor market gained 151,000 jobs in January, after the warmest temperatures in years boosted hiring in weather-sensitive sectors like construction, helping payrolls to rise by an average 279,000 jobs per month in the fourth quarter last year. Fears of a recession in the wake of poor economic reports in December and slowing growth in China sparked a global stock market rout at the start of the year, causing financial market conditions to tighten. Financial markets have priced out bets of an interest rate rise at the Fed's March 15-16 policy meeting and the probabilities for rate increases for the rest of the year remain rather small. Significant data such as consumer and business spending improved strongly in January though, leading to predictions that economic growth in the first quarter could rise by at least a 2.5 percent at an annualized rate. The economy grew at a 1.0 percent pace in the fourth quarter of 2105. There is a risk, however, that payroll gains could come in below expectations after a survey on Thursday showed employment in the services sector fell in February for the first time in two years. Still, economists say any below-forecast number should not be interpreted as a sign of labor market weakness as companies are struggling to find qualified workers to fill open positions.

Asian shares looked set on Friday to post their strongest week in five months as global investors returned to riskier assets after a string of positive U.S. economic data and a bounce in oil and commodity prices. Globally, markets are rolling back the extreme risk-off trading they did in January and February. Chinese shares, however, failed to gain from the optimism, investors are awaiting the start of the annual meeting of China's parliament on Saturday, which will map out economic goals for the next five years. U.S. data on Thursday was positive on the whole, with factory orders rising and the service sector index showing continued expansion. Somewhat dimming the optimism, however, the services survey showed employment in the sector fell in February for the first time in two years. But that was not necessarily bad for U.S. stocks, as it helped to reduce expectations for a rate hike this month by the Federal Reserve, and pushed the dollar lower.

Crude oil prices gained in Asia on Friday ahead of rig count data in the United States and a mixed supply picture. Overnight, crude futures remained near one-month highs, wavering during a see-saw, choppy trade on Thursday, as investors continue to gauge whether OPEC will institute a production freeze later this month in order to stem a prolonged downturn in the oil industry. Crude prices shot up in overnight, Asian trading after bullish comments from Nigeria oil minister Emmanuel Kachikwu on the increased possibility of an OPEC-Non OPEC summit in Russia at the end of this month. The participants are expected to rekindle discussion on a joint agreement to freeze production, as prices remain sharply below levels from 20 months ago when crude peaked at $115 a barrel. Speaking at a conference in Abuja, the Nigerian capital, Kachikwu indicated that the objective of the meeting could be to agree on a compromise that would help raise oil prices back to $50 a barrel. The Nigerian minister's comments come several weeks after four nations including Russia and Saudi Arabia agreed in principle on the Doha Agreement, which would require the participants to cap output at their respective levels from January. The deal has been met with resistance from Iran, which has been looking to ramp up production following the completion of its historic nuclear deal at the start of the year. Neither Iran, nor Saudi Arabia confirmed their participation in the Russia meeting. Investors continued to digest a report from Reuters on Wednesday that Saudi Arabia has looked to initiate discussions with a host of major U.S. banks in an effort to secure a loan of up to $10 billion. At the end of last year, Saudi Arabia projected an annual 2016 deficit of 326.2 billion riyals ($87 billion) due primarily to the major downturn in oil prices. Also on Wednesday, the U.S. EIA said in its Weekly Petroleum Status Report that U.S. commercial crude inventories for the week ending on February 26 increased by 10.4 million barrels from the previous week. At 518.0 million barrels, U.S. crude oil inventories are at historically high levels for this time of year.

 

[SolidTrustMarket]

Daily Market Outlook 8 March

Asian shares fell on Tuesday as investors took profits after a month-long rally and investors grew wary of the market's near-term prospects ahead of major central bank meetings. The European Central Bank is widely expected to ease at Thursday's policy review, but there is a lot of uncertainty about how far it would go. Meanwhile, ahead of a U.S. Federal Reserve policy meeting, fed fund futures were barely pricing in one more hike this year. Additionally, China's February exports data released in morning trade disappointed analysts' expectations, falling 25.4 percent from a year earlier, while imports fell by 13.8 percent. Still, risk sentiment was broadly upbeat as the impressive rally in commodities markets spilled over into an array of assets such as the high-yielding Australian dollar and mining giant Glencore, which is up 5 percent and 35 percent, respectively in a week. Some investors talked about a potential bottom being formed in the commodity markets as large bearish bets are unwound and hopes of more coordinated measures from oil-producing countries to stem tumbling prices grew. Further improving the mood in the battered commodity sector, spot iron ore price surged almost 20 percent, hitting a near nine-month high on the back of China's plans to boost short-term output. Ecuador's Foreign Minister, Guillaume Long, said his government will host a meeting in Quito on Friday with Venezuela, Colombia, Ecuador and Mexico "to reach consensus over oil, especially prices."

China's February trade performance was much worse than economists had expected, with exports tumbling the most in over six years and imports also sliding, days after top leaders reassured investors that the outlook for the world's second-largest economy remains solid. Exports fell 25.4 percent from a year earlier, twice as much as markets had expected, while imports slid 13.8 percent. The export drop was the biggest since May 2009, but economists said it may not necessarily point to a significant worsening in conditions due to sharply reduced business activity during the long Lunar New Year holidays, which fell in early February this year. Still, January-February exports on a combined basis, which should iron out some of the holiday effect, fell 17.8 percent and imports 16.7 percent, pointing to persistently weak demand at home and abroad that is weighing on the economy of the world's largest trading nation.

After a long wait for inflation to accelerate, U.S. Federal Reserve officials face a complex and possibly divisive debate over whether recent evidence of rising prices is strong enough to move ahead with planned rate hikes. In separate statements on Monday, policymakers at the core of that debate staked out starkly different views, with Fed Vice Chairman Stanley Fischer saying economic data now points to the "first stirrings" of inflation, and Fed Governor Lael Brainard countering that the Fed should not move until inflation proves its "persistence." The differing views may not matter immediately, when the Fed meets next week. A rate hike at that meeting is not expected after weeks in which oil prices have remained depressed and global equity markets have been volatile. Fed officials have argued since mid-2014 that those inflation "headwinds" would pass, and recent data on prices of goods and services, as well as a jump in commodity prices, may indicate that time has finally come.

Oil prices fell on Tuesday on weak Chinese trading data, but Brent remained over $40 a barrel after jumping to 2016 highs the previous day as producers announced talks to support the market and investors opened new bullish bets. On the demand side, China's crude imports jumped 19.1 percent between January and February to 31.80 million tonnes(about 8 million barrels per day) despite overall weak commodity and trading figures released on Tuesday. Despite strong oil demand, questions about the sustainability of growing consumption weighed on markets as China's economic downturn saw its overall exports plummet by a quarter in February in the worst slump since 2009. China's vehicle sales, a key driver for gasoline demand, in February fell 3.7 percent from a year earlier to 1.37 million, data from China Passenger Car Association showed on Tuesday. Following steady rises from late February on the back of a falling U.S. rig count, oil markets gained strong traction last Friday after Russia's energy minister said that a meeting between the Organization of Petroleum Exporting Countries (OPEC) and other oil producers about freezing output could take place between March 20 and April 1.

 

[SolidTrustMarket]

Daily Market Outlook 9 March

Sharp losses in Chinese stocks pulled Asian equities further away from two-month highs on Wednesday, as weak trade figures from the world's second-biggest economy and a retreat in oil prices revived concerns about global growth. U.S. stocks also ended near the day's lows on Tuesday as energy shares tumbled, losing steam after hitting a two-month high on Friday. The reversal came as oil prices fell about 3 percent on Tuesday, ending six days of gains for benchmark Brent crude futures, following industry data showing U.S. stockpiles reached record highs again last week. Also casting a shadow on markets, China's February trade performance was far worse than economists had expected, with exports tumbling the most in over six years. Exports dived 25.4 percent from a year earlier on depressed demand in all of China's major markets, while imports slumped 13.8 percent, the 16th straight month of decline. The data did not bode well for many companies that have relied on strong growth in the world's second largest economy, with the energy and material sector at the top of the list. The People's Bank of China set the yuan's midpoint rate CNY=SAEC at 6.5106 per dollar prior to market open, weaker than both the previous fix. The currency opened stronger at 6.5062 but has since weakened to 6.5146 CNY=CFXS.

The dollar last stood little changed at 112.585 yen JPY=, having slid 0.7 percent overnight, while the euro was down 0.4 percent at 123.54 yen EURJPY=R, well off Friday's high of 125.585. European and U.S. stocks fell overnight while many commodities came under pressure after China's exports tumbled by the most in over six years last month. The soft China data highlighted risks facing the global economy, bolstering expectations for dovish outcomes at central bank policy reviews in Europe and New Zealand on Thursday. Financial markets expect the ECB to cut its deposit rate by at least 10 basis points and expand its asset-buying program. However, with so much already priced in, some traders are primed for a repeat of the sharp gains in the euro seen in December when the ECB's measures fell short of market expectations. Ahead of the ECB, the Bank of Canada will announce its policy decision later on Wednesday. The yen was broadly firmer early on Wednesday as demand for the safe-haven currency picked up after disappointing Chinese trade data took the wind out of a global rally rooted in stronger risk appetites.

Oil prices were only slightly higher on Wednesday as support from falling U.S. production was countered by a strengthening U.S.-dollar and concerns over slowing demand. Analysts said falling U.S. output was lending support to the market but that concerns over slowing demand and an ongoing global production and storage overhang was capping any potential for bigger price gains. Price gains were also capped by a strengthening U.S. dollar, which reversed recent losses against leading currencies .DXY, potentially hampering demand as dollar-denominated crude gets more expensive as the greenback rises. Also preventing a fundamental shift towards higher prices is a concern over faltering demand in China, where the economy is growing at its slowest pace in a generation. China's February trade performance was far worse than economists had expected, with exports tumbling the most in over six years. Although China imported record crude volumes of 8 million barrels per day (bpd) in February, analysts expect this figure to fall as the Beijing scales back buys for its strategic reserves, and car sales begin to fall as the sharp economic slowdown starts to show results. Additionally, chances of a coordinated freeze in production to halt a ballooning global supply glut of over 1 million bpd above consumption are ebbing as OPEC-member Kuwait said it would only cap output if all major producers participate, including Iran, which has balked at the plan. One key factor in determining the oil market balance will be U.S. output, which the government said would be 8.19 million bpd in 2017, down from over 9 million bpd currently. Fresh U.S. output data is scheduled to be published later on Wednesday.

 

[SolidTrustMarket]

Daily Market Outlook 10 March

Asian stocks edged up on Thursday, encouraged by a rally in crude oil prices and expectations that the European Central Bank will ease policy later in the day, emulating policymakers elsewhere seeking to bolster their struggling economies. In recent months, gloom over China, tumbling commodity prices and deflationary pressures have prompted aggressive easing by central banks, including a move to negative rates by the Bank of Japan in January. China's consumer inflation beat forecasts in February, accelerating at its fastest pace since July 2014, while producer prices slowed their slide for the second straight month, taking some pressure of policymakers to rush out more monetary easing. Annual consumer inflation edged up to 2.3 percent in February, the National Bureau of Statistics said on Thursday, from January's 1.8 percent and above the 1.9 percent predicted by analysts. That was the fastest year-on-year increase since July 2014. A 7.3 percent pick-up in food prices was mainly due to cold weather and the Chinese New Year seasonality effect, Yu Qiumei, a senior NBS statistician, said in a statement accompanying the data. Non-food inflation was 1.0 percent.

The euro was under pressure in Asian trade on Thursday ahead of a European Central Bank meeting at which policymakers were expected to take further easing steps, while the kiwi skidded after the Reserve Bank of New Zealand surprised with an interest rate cut. The ECB is expected to cut the deposit rate by 10 basis points to -0.40 percent, announce more asset purchases and possibly introduce tiered interest rates like the Bank of Japan in a bid to boost inflation, according to a Reuters poll published on Monday. The euro's weakness is indicating something positive out of the ECB meeting, so the market may rise further in the afternoon. The focus was on how much the ECB, which had already cut rates into negative territory, would ease. Euro zone government bond yields and short-term interest rates fell earlier this week after weak Chinese trade data further enhanced worries about the health of the global economy. But after the ECB failed to meet the markets' high expectations in December, traders remain wary about another disappointing outcome. While tighter financial conditions a month ago may have warranted more drastic easing steps, some of those conditions have showed signs of improvement, she said, and therefore she expects only a further cut to interest rates into negative territory and a modest increase in purchases under the quantitative easing program.

Oil prices dipped early on Thursday after U.S. crude hit 2016 highs the day before and Brent shot back over $40 per barrel, with analysts warning that larger gains would be unwarranted as a global glut continues to outweigh strong demand. The dips came after prices rose as much as 5 percent on Wednesday, with U.S. crude hitting three-month highs following a big gasoline inventory drawdown, which overshadowed record-high crude stockpiles. But analysts warned that a global crude production overhang of over 1 million barrels per day (bpd) showed few signs of abating. With U.S. crude inventories at records despite strong demand, the focus lies on a potential agreement between producers from the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, and non-OPEC exporters led by Russia to rein in output. Barclays said there was no talk of a production cut during a research trip to Saudi Arabia and that the country's goal was to maximize its oil revenue by maintaining current production levels. Barclays said that Saudi Arabia would likely keep production around 10.2 million bpd over the next five years. Most analysts expect the oil glut to last into 2017 or even 2018, resulting in relatively low crude prices. Only by 2020 is there a consensus for prices to rise towards $70 a barrel, based on lower production due to low investment and defaults as well as strong fuel demand especially from China and other emerging markets. But Deutsche Bank said that China might see lower than expected fuel demand growth from the 2020s. "Chinese oil demand growth, the largest single contributor to world oil demand growth, may begin to flatten more quickly than some long-term projections indicate," the bank said in a report to clients this week. A slowdown in China's oil demand would have significant impact on global crude prices as it has accounted for 37.5 percent of world oil demand growth since 2010, Deutsche said.

 

[SolidTrustMarket]

Daily Market Outlook 11 March

The euro hung onto hefty gains in Asia on Friday after the European Central Bank eased aggressively but suggested it was running out of room to cut interest rates, even if other stimulus options remained. The muddled message sent European bond yields surging and snuffed out a nascent rally in risk sentiment, leaving Asian share markets at a loss on how to react. Markets went on a wild ride overnight after ECB chief Mario Draghi suggested there were limits to negative rate policy. "From today's perspective and taking into account the support of our measures to growth and inflation, we don't anticipate that it will be necessary to reduce rates further," proved to be the offending sentence.

European Central Bank chief Mario Draghi unleashed a bold easing package on Thursday, cutting rates and expanding asset buys, but undid the very stimulus he hoped to achieve by suggesting there would be no further cuts. That comment drove the euro to unwanted gains against the dollar and prompted criticism from some that Draghi, who already in December disappointed markets by under-delivering, had once again botched his communication. Seeking to resurrect corporate activity and investments, the ECB said it would start buying corporate debt and even offered to pay banks for lending to companies in the ailing euro area in a bid to kick start growth and stave off the threat of deflation. The Bank has sought for three years to push inflation up to its target level, spending 700 billion euros on asset buys in the past year alone. But it has been to no avail amid weak investment, high unemployment, high debt and productive slack in the economy. Draghi announced that ECB staff had slashed its inflation and growth expectations, predicting that even with fresh stimulus, price growth will not reach its target for years to come and growth will slow. Markets initially cheered the package but reversed course after Draghi hinted the ECB was done cutting rates and ruled out a tiered deposit rate structure -- a system of multiple rates already used in Switzerland and Japan to encourage lending to companies while also punishing banks that hold too much cash. The euro reversed course on Draghi's comments and firmed close to 1.5 percent EUR=. Euro zone stock fell by 1.5 percent and euro area bond yields soared -- all effectively tightening monetary conditions and so going counter to Draghi's aims. Delivering above expectations, the ECB raised monthly asset buys to 80 billion euros from 60 billion euros and cut its main refinancing rate to zero from 0.05 percent. It also cut its deposit rate by 10 basis points to -0.4 percent and shaved the marginal lending rate -- used by banks to borrow from the ECB overnight -- to 0.25 percent from 0.3 percent.

Oil prices rose over 1 percent on Friday supported by fresh investment and a weaker dollar, which makes crude cheaper for countries using other currencies, but analysts warned that any price rally was pre-mature as a global glut remained in place. Traders said that the price support came from a weaker dollar, which on Thursday fell by 2.5 percent against a basket of currencies .DXY in volatile trading after the European Central Bank eased aggressively. A weaker dollar can be seen as supportive for oil prices as it makes dollar-traded oil cheaper for countries using other currencies, potentially spurring fuel demand. Traders said prices also received support from fund money flowing into oil markets. Friday's stronger prices came following losses the previous day after a meeting between major producers to coordinate a freeze in output looked unlikely to even take place since Iran would not commit to attending. Freed from international sanctions that more than halved its output to little more than 1 million barrels per day (bpd), Iran said it would not participate in a proposed agreement between top producers Saudi Arabia and Russia to freeze production at January levels, when both pumped over 10 million bpd.

A global glut in supply means that over 1 million bpd of crude is produced in excess of demand and that has left storage tanks around the world brimming with unsold oil. Analysts say that a fundamental reduction in supplies, for instance through a production cuts, must happen before prices can move higher.

 

[SolidTrustMarket]

Daily Market Outlook 14 March

Asian shares started the week higher on Monday, buoyed by gains on Wall Street, firmer crude prices and glimmers of strength in weekend data from China. The BoJ’s two-day policy meeting begins on Monday. Policymakers were set to discuss this week whether to exempt $90 bn in short-term funds from the BOJ's newly imposed negative interest rate, people familiar with the matter said, after the securities industry warned that investment money would be driven into bank deposits. The BOJ is seen likely to stay on hold after adopting negative interest rates at its meeting in late January. The U.S. Federal Reserve and the Bank of England are also seen standing pat at their respective meetings later this week, in the wake of the ECB's move to expand its easing program. Data released before the market opened showed Japan's core machinery orders rose a more-than-expected 15.0% in January from the previous month. Chinese data released on Saturday, meanwhile, showed continuing weakness in other key parts of the economy, but also contained a few bright signs. Manufacturing output in January and February grew at its weakest pace since 2008, while retail sales rose at their slowest rate since May 2015. But fixed-asset investment, a crucial driver of the economy, gained 10.2 percent in the first two months compared with the same period a year earlier. Chinese data out over the weekend showed further weakening across the board, but it is clear that government spending and a recovery in the real estate market are helping hold up growth. People's Bank of China (PBOC) Governor Zhou Xiaochuan said over the weekend that central bank won't resort to excessive stimulus to bolster growth but will keep a flexible stance in the event of an economic shock.

The U.S. dollar wallowed at one-month lows against a basket of major currencies early on Monday with the Federal Reserve seen almost certain to stand pat at this week's policy review. Dollar bulls are hoping the central bank will signal an intention to hike more than once this year. Conversely, any hint that the tightening cycle could be drawn out will likely result in a further fall in the dollar. "The FOMC statement and members' fed funds rate forecasts will be closely scrutinized. We see risk of USD weakness if the 2017-18 'dots' were to be moved lower, referring to Fed monetary committee participants' "dot plots" of their interest rate expectations. Ahead of the Fed's March 15-16 meeting, the major currencies were pretty much in consolidation mode, taking stock of last week's choppy action. There was much confusion when the European Central Bank delivered bold easing measures on Thursday, only to later suggest that further cuts in interest rates might be limited. Traders said there was a slight change of heart on Friday when the market appeared to show some signs of appreciating the extent of the ECB's latest action. But tempering bullish sentiment slightly was mixed data from China on Saturday, which showed weakness in factory activity but a pick up in real estate investment. There is little in the way of market-moving data out of Asia on Monday, leaving the focus on the Fed, the Bank of Japan and Bank of England. Both the BOJ and BOE are expected to stay on hold at their meetings this week.

U.S. crude futures were trading at $38.41 per barrel at 0239 GMT, down 10 cents from their last settlement. While Morgan Stanley said that oil prices had likely bottomed out, it warned that a slowing economy and high production would prevent sharp rises. "Oil prices now seem to have bottomed, even though they are likely to stay subdued for the rest of this year before starting to move higher in 2017. The International Energy Agency (IEA) on Friday said that oil prices had bottomed out due to U.S. and other output cuts outside the Middle East-dominated OPEC. The U.S. rig count fell for a 12th straight week last week to a total of 386, its lowest since December 2009 as drillers continue to slash capital expenditure. Others, like Goldman Sachs, warn that ongoing global overproduction, which continues to see over 1 million barrels of crude produced in excess of demand every day, will pull prices back down again. So far, demand in core markets like China remains strong. China's January-February refinery throughput rose 4.6 percent compared to the same period a year earlier to 87.08 million tonnes (10.59 million barrels per day), official data showed on Saturday. The data release came shortly after China reported record daily crude imports of 8 million barrels per day. In traded markets, sentiment leans towards higher prices, with the amount of managed short positions open for U.S. crude, which would profit from falling prices, down over 40 percent since mid-February, while the amount of trades betting on price increases stands near record highs.

 

[SolidTrustMarket]

Daily Market Outlook 16 March

Asian shares were mixed on Wednesday while the dollar dithered as markets waited anxiously for the Federal Reserve to provide guidance on the risk of U.S. rate hikes this year. While no move is expected at this meeting it does include updates of Fed members' economic projections and a news conference with Chair Janet Yellen, events that have caused violent market reactions in the past. Hurting sentiment were downward revisions to retail sales that left consumer spending looking a lot softer so far this year. One result was that the Atlanta Fed "GDPNow" measure of economic growth dropped to 1.9 percent for the first quarter, from 2.2 percent. The disappointing data only heightened the stakes for the FOMC meeting. Analysts generally assume Fed projections for interest rates - widely known as the "dots" - will indicate only three hikes are likely this year instead of four. Yet the market is pricing in just one move of 25 basis points for 2016. This leaves equity and bond markets vulnerable to any hint of hawkishness from the Fed, say if Yellen made it clear that hikes were still possible at the April and June meetings. In contrast, the U.S. dollar would likely benefit from the chance of higher rates.

The dollar was in a holding pattern early on Wednesday as markets waited for fresh guidance from the Federal Reserve. The BoJ on Tuesday skipped a chance to expand its massive asset buying program even as it offered a bleaker view of the economy. Some traders said that combination cast a shadow on risk sentiment, which perversely bolstered demand for the safe-haven yen. For the Fed, no policy action is expected but the market will be hyper-sensitive to any guidance on when it might deliver its next hike in interest rates. Any signal that there is more than one hike in store this year will be positive for the greenback. U.S. Federal Reserve policymakers are seen leaving short-term interest rates unchanged at a two-day policy meeting that began Tuesday, but also to signal that a rate hike is not too far off as long as the job market and inflation continue to improve. A recent string of stronger U.S. data, including faster-than-expected job growth in February, has eased fears in the past few weeks that headwinds from abroad, and the tighter financial conditions they sparked at home, could derail the recovery. Still, the path to a next rate hike is unlikely to be smooth. U.S. retail sales were reported on Tuesday to have been weaker than thought in January, renewing worries over domestic growth prospects, even as the BoJ offered a gloomier outlook for the world's third-biggest economy without immediately adding to stimulus. Fresh forecasts from the Fed's 17 officials released after the meeting ends on Wednesday will likely signal three or possibly two rate hikes this year, a slower path of rate hikes than the four 2016 rate hikes envisioned in December, the last time forecasts were published The expected downgrade may largely reflect the Fed's decision in January to put policy on hold for the time being, rather than new worries over the U.S. or global outlook. Meanwhile, the U.S. unemployment rate held at 4.9 percent in February, near the level many Fed officials believe represents full employment.

Oil prices rose on Wednesday after falling the previous session on expectations U.S. output will decline further as some producers are under increasing financial distress and as early inventory data showed a less-than-expected increase. Inventory data from the American Petroleum Institute showed on Tuesday that U.S. crude stockpiles rose 1.5 million barrels last week, less than half of what was expected by an analyst poll, lending markets some support. The U.S. government's EIA will issue official production and inventory figures later on Wednesday. That data is expected to show crude inventories rose to a record for a fifth straight week. U.S. shale producer Linn Energy said on Tuesday that bankruptcy may be unavoidable as the company missed interest payments amid a slump in oil prices of as much as 70% since mid-2014. Despite Wednesday's price rises, oil markets remain dogged by a global glut which sees over 1 million barrels of crude pumped every day in excess of demand. While Saudi Arabia and Russia have proposed to freeze their output at January volumes, near record levels of over 10 mn bpd each, Iran has said it would only participate once its production hits 4 million bpd from a current 3 mn bpd.

 

[SolidTrustMarket]

Daily Market Outlook 18 March

Asian shares edged higher on Friday, oil touched a 2016 high and the U.S. dollar weakened as investors turned more positive on riskier assets after the Federal Reserve's cautious stance on further interest rate increases. Chinese home prices rose at their fastest clip in almost two years in February thanks to red-hot demand in big cities. Still, risks of overheating in some places combined with weak growth in smaller cities threaten to put more stress on an already slowing economy. The rally in commodities and equities were spurred by Wednesday's Federal Reserve review when policy makers took a more cautious stance on future interest rate increases.

The dollar held near a 17-month low struck overnight against the yen on Friday as the Federal Reserve's less hawkish outlook for U.S. interest rates weighed on the U.S. currency. The dollar has slid sharply since the U.S. central bank lowered its expectations for interest rate increases this year at the midweek Federal Open Market Committee (FOMC) meeting. The market's focus was on how far the yen could rise before it elicited some kind of response from Japanese authorities. The dollar's post-FOMC weakness against the yen presents a potential headache for Japan. The country would like to see the yen remain relatively weak to support its exporters, but the market thinks Japan has to tread carefully lest it is accused of engineering competitive devaluations. The European Central Bank eased extensively last week, while the Bank of Japan stood pat at its policy meeting earlier on Tuesday. The BOJ had adopted negative interest rates in January, but the shock move did little to weaken the yen. "The Japanese authorities have not been clear in their stance towards a strong yen. The market could attempt to test the authorities to see where exactly they stand on the yen," Yamamoto said. Elsewhere, sterling received a further boost against the broadly weaker dollar after the Bank of England on Thursday kept interest rates steady as expected and said rates were more likely to rise than not. The pound traded just below a one-month high of $1.4504 GBP=D4 scaled overnight. It has clawed back from a seven-year low of $1.3836 hit late in February on concerns over the potential exit of Britain from the European Union. A continuing bounce in crude oil prices boded well for commodity-linked currencies. The Australian dollar rose to an eight-month peak of $0.7681 AUD=D4 on Friday, while the Canadian dollar advanced to a five-month high of C$1.2946 CAD=D4 versus the dollar overnight.

U.S. oil futures touched new highs for 2016 on Friday, adding to strong gains the previous session as optimism grew that major producers would strike a deal to freeze output, while a more benign interest rate environment also supported prices. Oil prices have surged more than 50 percent from 12-year lows since the Organization of the Petroleum Exporting Countries floated the idea of a production freeze, boosting Brent from about $27 a barrel and U.S. crude from around $26. U.S. oil is heading for a fifth week of gains, the longest rising streak in about a year, while Brent is on course for a fourth weekly increase, the longest run in about 12 months. But some are urging caution after the strong gains. "Global fundamentals are little changed and oil has instead been lifted by higher risk-appetite," BNP Paribas said in a note. "A dialogue among key producing countries to address oil output will at best yield a decision to freeze output, but not the much-needed reduction required to rebalance the market," BNP said. BNP estimates there will be a 1 million barrel increase in global stocks by the end of the first half of 2016. Still, a weakening dollar .DXY after a Federal Reserve policy decision on Wednesday that indicated two U.S. rate hikes this year instead of four is also attracting oil buyers that hold other currencies. OPEC kingpin Saudi Arabia and non-OPEC producers led by Russia will meet on April 17 in the Qatar capital Doha, aiming for the first global supply deal in 15 years.

 

[SolidTrustMarket]

Daily Market Outlook 23 March

Asian shares slipped on Wednesday, but held near 3 1/2 month highs hit earlier this week as investors took comfort from a brightening global economic picture, as they absorbed the shock of the suspected Islamic State suicide bomb attacks in Brussels. Koichi Yoshikawa, executive director of financial markets at Standard Chartered Bank in Tokyo, said the recent Group of 20 meeting and annual gathering of China's parliament had restored some faith in the outlook for the global economy, as investors were reaassured that policymakers would take appropriate monetary and fiscal policy measures to bolster their economies. Financial markets took in their stride news of the suicide bomb attacks that killed at least 30 people in Brussels. Risk appetite quickly returned and gains in safe-haven assets evaporated within hours. The dollar, which edged down in early trade as Asian investors reacted to news of the Brussels attacks, was helped by a rise in U.S. bond yields after Chicago’s Federal Reserve president, seen as a policy dove, struck a bullish tone on the U.S. economy. Chicago Fed President Charles Evans said he expects two more rate increases this year, based on the current economic outlook.

The dollar steadied on Wednesday, underpinned by hawkish comments from U.S. Federal Reserve officials as Asian investors reacted to overnight news of attacks in Brussels. Attacks on Brussels airport and a rush-hour metro train in the Belgian capital, which occurred late in Tuesday's Asian session, killed dozens and triggered security alerts across Western Europe. The U.S. central bank has become so cautious about raising interest rates at even a moderate pace that the once-fringe preference of one of its most dovish policymakers for super-slow interest-rate increases has gone mainstream. On Tuesday, Chicago Fed President Charles Evans said he expects two rate hikes this year, given his forecast for 2 percent to 2.5 percent economic growth and for unemployment to fall further to 4.75 percent by the end of the year. U.S. Treasury yields rose, as traders took his comments to be bullish for the U.S. economy. Evans, however, was hardly staking out new ground. This was the same call that he had made last December, when the Fed raised interest rates for the first time in nearly a decade. The Federal Reserve should consider another interest rate hike as early as next month if the U.S. economy continues to improve as it has of late, a top Fed official said on Tuesday, as he said he would prefer at least three hikes before year end. Philadelphia Fed President Patrick Harker, a relatively new addition to the U.S. central bank, said that while he supported last week's decision by his colleagues to leave policy unchanged, "there is a strong case that we need to continue to raise rates." Evans does not have a vote on policy this year, but does take part in the Fed's regular policy-setting meetings. He said he expects inflation to rise to 1.75 percent and wants more evidence it is headed to 2 percent, adding that he does not mind if it overshoots the Fed's 2-percent goal. If inflation rises to 2.5 percent and appears to be sustainable, the Fed should make policy at least neutral and perhaps restrictive to tamp it down, he said.

Oil prices fell in early Asian trading on Wednesday after figures from an industry group showed U.S. crude stockpiles rose last week more than expected, reinforcing concerns that supply continues to exceed demand. The American Petroleum Institute (API), an industry group, said in a report after Tuesday's oil market settlement that U.S. crude stockpiles rose 8.8 million barrels last week to reach a record high of 531.8 million. The stockpile growth reported by the API was 5.7 million barrels higher than estimates from analysts polled by Reuters. Official crude inventory data from the U.S. government will be released later on Wednesday. The official U.S. data is likely to show that oil inventories rose to a record high for a sixth straight week, while oil product stockpiles probably fell, a Reuters survey showed. Adding to the glut is the revival of Iranian barrels on the international market after sanctions were lifted in January. Iran's crude oil exports have raised to 2.2 million barrels per day (bpd) since sanctions were lifted, an increase of 900,000 bpd, a senior official was quoted as saying on Tuesday. "Until January we could only export 1.3 million barrels of oil but two months after the (lifting of) sanctions we are exporting 2.2 million barrels of oil per day," Vice President Eshaq Jahangiri was quoted as saying by the Shana agency. Iranian flows may also increase as ship insurers have stepped in to plug a shortfall in cover for transporting Iranian oil resulting from the fact that U.S. reinsurers are still restrained by U.S. sanctions, according to officials involved in the initiative.

 

[SolidTrustMarket]

Daily Market Outlook 24 March

The dollar advanced for a fifth straight session on Thursday, pressuring commodities and Asian shares after yet another Federal Reserve official talked up the chance of more than one increase in U.S interest rates this year. St. Louis Fed President James Bullard joined a chorus of officials in highlighting the risk of at least two rate hikes this year, with the first perhaps as soon as April. Markets imply only one increase and dealers suspect an orchestrated attempt by the Fed to shift that thinking. "There is now some speculation on April, as Bullard adds to the relatively optimistic Fed rhetoric this week," "The focus now turns to Fed Chair Yellen who will be speaking at the Economic Club of New York next Tuesday, which could give further clarity on the matter."

Gold drifted lower in Asia on Thursday as investors show caution on the path of potential rate hikes by the Federal Reserve. Overnight, gold futures fell sharply on Wednesday, tumbling to three-week lows, as a host of hawkish comments from Federal Reserve increased the possibility that the U.S. central bank could approve multiple interest rate hikes by the end of 2016, weighing on the precious metal. Gold suffered its worst one-day decline on the year, posting only its second daily loss of at least 2% over the last 10 weeks. Gold futures have closed lower in three of the last four sessions and seven of the last 10 trading days. In spite of the recent sell-off, gold has still gained more than 14% in value since the start of the new year and is on pace for one of its best opening quarters in 30 years. While delivering a speech to bond traders on Tuesday night at the Money Marketeers of New York University's conference on Growth and the Role of Economic Policies, Federal Reserve Bank of Philadelphia president Patrick Harker squarely aligned himself with his hawkish colleagues on the Federal Open Market Committee (FOMC). Citing continued improvement in the economy, Harker said the Fed should consider raising interest rates as early as its next meeting on April 28-29 and that he prefers at least three rate hikes before year's end. Harker, who became president of the Philadelphia Fed in mid-2015, is a non-voting member of the FOMC until the start of next year. "I think we need to get on with it," Harker said. "I am not a two (rate) rise person. This economy is really quite resilient to a lot of the headwinds so if that continues I would be supportive of another 25 basis point rise." Separately, Chicago Fed president Charles Evans said Tuesday that he expects two more rate hikes from the Fed this year. The FOMC's benchmark Federal Funds Rate continues to hover around 0.37%, after the U.S. central bank opted to leave its target range unchanged last week between 0.25 and 0.50%. The Fed has held short-term interest rates steady at each of its last two meetings since it ended a seven-year zero interest rate policy (ZIRP) in December. Even with three rate hikes over the next nine months, Harker still believes monetary policy would be "incredibly accommodative" around 1%. Harker's statements followed comparable hawkish comments from San Francisco Fed president John Williams and Atlanta Fed president Dennis Lockhart earlier this week. In recent months, dovish members of the Fed have argued that rates should continue to remain relatively low, as slowing economic conditions in China spill over into the global economy. Gold, which is not attached to interest rates or dividends, struggles to compete with high-yield bearing assets in periods of rising rates.

U.S. oil prices fell in Asian trading on Thursday, adding to a slump in the previous session, after stockpiles rose for the sixth week to another record, sapping the strength of a two-month rally in prices. The U.S. government's Energy Information Administration (EIA) said crude stockpiles climbed by 9.4 million barrels last week - three times the 3.1 million barrels build forecast by analysts in a Reuters poll. The continued rise in stockpiles is grinding away at the gains in prices that were largely driven by plans of major producers, including Saudi Arabia and Russia, to freeze production. "OPEC production is still high and Iran is expected to continue to ramp up," said Tony Nunan, oil risk manager at Mitsubishi Corp in Tokyo. "I expect crude to come back down again and test the $35 level again if we continue to get builds," he said. The market was also supported by a release showing crude stockpiles at the Cushing, Oklahoma, delivery hub - an important data point - fell for the first time in seven weeks. Things could get worse for oil bulls, with trading houses betting on oil markets being over supplied for at least two more years and looking to extend or lock in new leases on storage tanks.