Daily Market Outlook by Solid Trust Markets

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Daily Market Outlook 5 May

Asian shares slipped for a seventh straight session on Thursday as mixed economic data did nothing to assuage concerns about global growth, keeping sovereign bonds well supported as a hedge against deflation risks. The latest survey from China showed the service sector expanded at a slower pace in April, though firms did resume adding staff. The Caixin/Markit services purchasing managers' index (PMI) dropped to 51.8, from 52.2 in March, but at least stayed in growth territory. Hong Kong's version of the PMI slid deeper into contractionary territory to touch an eight-month low. Employment sub-component rose to 50.9 in April from March's 48.9, reversing the first decline in staffing since August 2013. The solid new business reading was boosted by stronger underlying client demand and new products, the survey said, while companies were also able to pass along higher input prices.

U.S. services sector expanded in April as new orders and employment accelerated, bolstering views that economic growth would rebound after almost stalling in the first quarter. The growth outlook was, however, dimmed by another report on Wednesday showing private employers hired the fewest number of workers in three years in April. The Institute for Supply Management said its nonmanufacturing index rose 1.2 percentage points to a reading of 55.7 in April, with the majority of industries expressing optimism about the business climate and the economy. A gauge of services sector employment rose to 53.0 last month from a reading of 50.3 in March. Construction firms reported "severe" shortages of unskilled labor. The rise in services sector employment last month eclipsed the slightly weak ADP National Employment Report, which showed private payrolls increased 156,000 last month, the smallest gain since April 2013, after rising 194,000 in March. According to a Reuters survey of economists, nonfarm payrolls likely increased by 202,000 jobs in April after rising 215,000 in March. The unemployment rate is forecast holding steady at 5.0 percent. The labor market has so far weathered the sluggish economy, which has been slammed by weak exports as a result of the lingering effects of the dollar's rally last year and tepid global demand. The government reported last week that the economy slowed to an annual growth pace of 0.5% in the first quarter after expanding at a 1.4 percent rate in the fourth quarter. But economists expect the soft first-quarter GDP growth would be revised to at least a 0.9% pace later this month after a third report from the Commerce Department showed a strong increase in factory orders in March.

The yen showed signs of fatigue on Thursday after stepping back from recent peaks, while the greenback was supported by optimism the U.S. economy could bounce back after nearly stalling in the first quarter. Prime Minister Shinzo Abe on Wednesday warned Japan will act if necessary to weaken the yen, although many believe the bar is high for any market intervention. The possibility of currency intervention by Japanese authorities would likely become much higher if the dollar were to fall to 100 yen, said Tan Teck Leng, FX strategist for UBS Wealth Management in Singapore. In the past, Japanese officials had issued stronger verbal warnings on the yen's rise before intervening, Tan said.

Oil prices jumped on Thursday as a huge wildfire in Canada disrupted its oil sands production, while escalating fighting in Libya threatened the North African nation's output. Traders said that WTI prices were driven up by uncontrolled wildfires in Canada that disrupted oil production in the province of Alberta. A massive wildfire has forced the evacuation of all 88,000 people in the western Canadian oil city of Fort McMurray and burned down 1,600 structures, and has the potential to destroy much of the town, authorities said on Wednesday. Brent was pushed higher by escalating fighting in Libya. Libya's already crippled oil production is at risk of further decline from a stand-off between rival eastern and western political factions, which prevented a cargo belonging to trading giant Glencore from loading. A Tripoli-based oil official warned the country's oil output could fall by 120,000 bpd if the Benghazi-based National Oil Corporation (NOC), set up by the rival eastern government, continues to block tankers loading for Tripoli from the eastern Marsa el-Hariga port. Libya's output has already fallen to less than a quarter of its 2011 high of 1.6 mn bpd. Investment firm ETF Securities said that unplanned outages within the OPEC, of which Libya is a member, stood above 2 mn bpd, the highest in at least five years. Adding to these disruptions, U.S. production continues to fall, with the latest official figures showing a decline by 4.4 percent since January and by over 8 percent since mid-2015 to 8.825 million bpd, and ETF Securities said overall market fundamentals were turning bullish.

 

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Daily Market Outlook 5 May

Asian shares wallowed at one-month lows on Friday as investors braced for the U.S. April payrolls report after jobless claims data out earlier raised doubts over the seemingly rosy employment picture. Economists polled by Reuters forecast Friday's payrolls data will show U.S. employers added 202,000 workers in April following a 215,000 increase in March, with the jobless rate holding at 5.0 percent. But job-related data published over the past couple of days have been softer than market expectations, casting a shadow on expectations of solid job growth. The number of Americans filing for unemployment benefits rose more than expected last week, posting the biggest gain in more than a year, although its four-week average, often seen as a better gauge of the underlying trend, still stood near a four-decade low. Another report on Thursday showed a 35 percent surge in planned layoffs by U.S.-based employers last month. Most of the announced job cuts were concentrated in the energy sector, which is reeling from low oil prices. Yet another compilation, the ADP National Employment Report, showed U.S. private employers added the fewest workers in three years in April, well below economists' expectations. The dollar index "is likely to rip higher if the non-farm payrolls do not massively miss the market consensus, although the big undershoot in the ADP employment numbers this week has certainly highlighted risks to the downside," Angus Nicholson, market analyst at IG in Melbourne, wrote in a note.

The dollar firmed against the euro and yen on Friday ahead of the April U.S. non-farm payrolls due later in the day that could support the greenback. The yen, which jumped after the Bank of Japan opted to stand pat on monetary policy last week, had some of its gains trimmed after Japanese officials said they could act if needed to halt its rise. Investors, however, remain skeptical whether an intervention by Japan would have any lasting effect. The euro, which had risen to an eight-month peak of $1.1616 on Tuesday, was effectively unchanged at $1.1405 EUR= after losing 0.8 percent overnight. Traders attributed the common currency's fall to covering of dollar short positions ahead of Friday's U.S. jobs data. Investors only see a 13 percent chance that the Federal Reserve will hike interest rates at its June meeting, according to CME's FedWatch, and a less than 50 percent chance of a hike at every meeting until December. The reduced prospect of monetary tightening has been a major factor that has weighed on the dollar recently. Still, the market remained wary of the jobs data opening a fresh phase of dollar selling. "In such a case, what bears watching is how speculators react. They could quickly move past the U.S. jobs report and decide to renew their yen buying," added Murata at Brown Brothers Harriman, who attributes the end of the "Abenomics" market as a key factor behind the yen's recent appreciation. Abenomics is a series of reflationary measures initiated by Japanese Prime Minister Shinzo Abe which had helped weaken the yen, pushing it to a 13-year low near 126 to the dollar in June 2015.

Oil prices dipped on Friday, dragged down by a surging dollar that at least temporarily outweighed supply disruptions in North America, where a massive wildfire was threatening Canada's huge oil sands operations. The dollar firmed against the euro and yen on Friday ahead of the April U.S. nonfarm payrolls due later in the day that could support the greenback. The strong dollar at least temporarily outweighed the effects of deep output cuts in North America. An out-of-control fire around the Canadian oil city of Fort McMurray has forced the evacuation of its residents and the closure of 690,000 bpd of production from Canada's total oil sands output of 2.2 million bpd. Adding to the supply outage in Canada is an ongoing decline in U.S. output. Data by the U.S. EIA shows that U.S. crude oil output has fallen by 410,000 bpd this year. and by 800,000 bpd since mid-2015, as producers succumb to a rout that saw prices tumble more than 70 percent between mid-2014 and early-2016. Analysts said the hits to North American output, combined with disruptions in Latin America, were contributing to a fast erosion of global oversupply that peaked as high as 2 million bpd last year.

 

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Daily Market Outlook 9 May

Asian stocks were mostly lower on Monday after a disappointing U.S. jobs report raised questions about the underlying strength of the world's biggest economy and worse-than-expected trade numbers out of China. U.S. shares posted modest gains on Friday as the weaker-than-expected U.S. jobs report fanned expectations that the Federal Reserve would have to hike interest rates at a very slow pace.

The dollar edged higher versus the yen on Monday following a choppy end to last week, while disappointing trade figures out of China barely dented an already defensive Australian dollar. The U.S. currency initially fell in reaction to the lackluster jobs report on Friday but bounced after New York Federal Reserve President William Dudley said two rate hikes this year were still a "reasonable expectation". U.S. non-farm payrolls increased by 160,000 in April, the smallest gain since September, and below the 200,000 economists had expected. It prompted some financial institutions to lower their expectations of an interest rate hike for this year to just one from two before the report. But the market was quick to reverse positions on closer look at the numbers, which showed an encouraging pick-up in annual wage growth. Also helping the dollar's rebound was New York Federal Reserve President William Dudley who said two U.S. rate hikes this year were still a "reasonable expectation". There was limited reaction to comments by Japanese Finance Minister Taro Aso on Monday that Tokyo is ready to intervene in the currency market if yen moves are volatile enough to hurt the country's trade and economy. Analysts said market participants may be reluctant to increase their bearish bets on the dollar versus the yen at this point, after having ramped up such bets recently. In contrast to the mixed U.S. jobs data, trade figures out of China on Sunday were clearly disappointing. Both exports and imports fell more than expected last month, underlining weak demand at home and abroad and dimming hopes of a recovery in the economy.

China's exports and imports fell more than expected in April, underlining weak demand at home and abroad and cooling hopes of a recovery in the world's second-largest economy. Exports fell 1.8 percent from a year earlier, the General Administration of Customs said on Sunday, reversing the previous month's brief recovery and supporting the government's concerns that the foreign trade environment will be challenging in 2016. China's exports to the United States – the country’s top export market – fell 9.3 percent in April from a year earlier, while shipments to the European Union – the second biggest market, rose 3.2 percent, customs data showed. China's cabinet has vowed to take steps to boost exports, including encouraging banks to boost lending, expanding export credit insurance and raise tax rebates for some firms. China had a trade surplus of $45.56 billion in April, versus forecasts of $40 billion.

Oil prices rose about 2 percent in early Asian trading on Monday as supply outages persisted over the weekend from Canada's wildfires that have shut half the country's vast oil sands capacity. Analysts were also digesting weekend news of Saudi Arabia's appointment of a new energy minister to take over from veteran oil minister Ali al-Naimi. The new appointee, Khalid al-Falih, is a believer in reform and low oil prices. Falih said on Sunday that the world's largest crude exporter was committed to meeting demand and would maintain its stable petroleum policies. "I think the wildfire is going to have a major impact as Canada exports some 3.5 million barrels per day of crude to the U.S.," said Carl Larry, director of business development for oil and gas at Frost & Sullivan. World oil supply remains in a glut, however, with an estimated oversupply of around 1.5 million bpd.

On Sunday, cooler weather, light rain and winds opposed to the direction of flames helped control the advance of the blaze that razed Alberta's oil sands boomtown Fort McMurray. Yet, energy firms such as Statoil and Husky Statoil shut their facilities in the area as a precaution. Eleven production firms and three pipeline operators that have curbed activities after the week-long inferno forced more than 1 million barrels in capacity offline. Officials said the fire had also done minor damage at CNOOC unit Nexen's Long Lake facility, in the site's yard. It was the first reported damage to an energy industry asset since the crisis began. Three major oil firms - BP, Suncor and Phillips 66 - have warned they will not be able to deliver on some contracts for Canadian crude. While Falih's appointment as energy minister could be bearish to oil in the longer term given the Saudis' increasing reluctance to use market intervention to boost prices, traders said the market was unlikely to sell off without further proof of his actions.

 

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Daily Market Outlook 12 May

Asian shares fell on Thursday following a dismal session on Wall Street, while the dollar firmed but remained shy of this week's highs and crude oil gave back some of its recent gains. But the weak retail reports offset any lift in sentiment, she said. In light of the murky economic outlook, U.S. Federal Reserve policymakers remain concerned about whether the market could stomach another interest rate hike. Fed really want to raise the policy rate so that they have some flexibility should the domestic economy need it, but given this highly unusual slow-growth environment, it's been difficult for there to be clear signals that it can digest policy normalization. The dollar added to its gains versus the yen after Takatoshi Ito said the BOJ is likely to expand monetary stimulus either in June or July. Ito is a prominent academic with close ties to Bank of Japan Governor Haruhiko Kuroda. For his part, Kuroda said the BOJ won't hesitate to take further easing steps if necessary, adding that there was still large downside risks to Japan's economy. The dollar had set an 18-month low of 105.55 yen on May 3, having slid after the BOJ held off from expanding its monetary stimulus at its policy meeting in late April. The greenback has since regained some footing as traders cut their bullish bets on the yen following a series of warnings from Japanese Finance Minister Taro Aso that the government would intervene to curb any excessive one-sided gains.

The U.S. dollar regained some ground against other major currencies on Thursday, but gains were expected to remain limited as investors remained cautious ahead of the Bank of England’s policy decision due later in the day, as well as U.S. jobless claims data. U.S. economic growth slowed to 0.5 percent in the first quarter, with the strength of the dollar late last year seen as a factor weighing on the economy. That has also supported expectations that the Fed may delay rate increases this year, further hampering dollar bulls. Sentiment on the yen remained fragile since Japanese Finance Minister Taro Aso said on Monday that financial authorities are prepared to intervene in the currency market if excessive moves in the yen are enough to affect the country’s economy. However, Bank of Japan Governor Haruhiko Kuroda said earlier Thursday that it would be difficult for Japan's finance ministry to intentionally weaken the yen to boost exports. EUR/USD held steady at 1.1421. Investors were looking to comments by BoE Governor Mark Carney, scheduled after the policy statement, for indications on the central bank’s future policy moves. Sterling remains on the defensive as the latest surveys show the "Brexit" referendum on Britain's continued membership in the European Union on June 23 is still too close to call. The Bank of England's monetary policy committee releases updated growth and inflation forecasts in a quarterly report on Thursday but uncertainty over Brexit is likely to keep the central bank extra cautious. Bank of England is expected to keep rates on hold at a record low of 0.5 percent, where they have remained for more than seven years. BOE Governor Mark Carney will tread carefully back into Britain's debate on whether to leave the European Union, when he sets out the central bank's latest forecasts.

Gradual return of Canadian oil sands output, reversing a sharp rise the previous day when the U.S. government detailed an unexpected fall in crude inventories. Traders said the dips were largely a result of profit-taking following intra-day Brent price rises of up to $2.95 the previous day when U.S. government data surprised with a drop in crude inventories. The U.S. Energy Information Administration (EIA) said on Wednesday that U.S. crude inventories fell 3.4 million barrels to 540 million barrels last week, compared with analyst expectations for an increase of 714,000 barrels and the American Petroleum Institute's (API) reported build of 3.5 million barrels in preliminary data issued on Tuesday. The surprise draw in inventories was offset on Thursday by an expected increase in Canadian oil sand crude output following disruptions to over 1 million barrels of daily production capacity due to wildfire. Despite the dip, major Middle East oil exporter Kuwait said that recent price rises were fundamentally justified. "Based on the decrease in production that has been shown in the last three weeks, I assume fundamentally the price represents the fall of production," Kuwait's acting oil minister Anas al-Saleh told Reuters on Thursday. He also said that the Organization of the Petroleum Exporting Countries (OPEC), of which Kuwait is a member, would not seek price supporting market intervention during its next scheduled meeting on June 2, and instead focus on dialogue among the producer cartel. At an April producer meeting, OPEC rivals Saudi Arabia and Iran could not agree on deal terms, triggering criticism that the producers' cartel had lost its ability to act.

 

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Daily Market Outlook 13 May

Asian shares fell on Friday after a rocky performance on Wall Street, while the yen nursed losses as traders wagered the Bank of Japan will add to its massive stimulus before too long. Major U.S. stock indexes closed mixed on Thursday, with the Nasdaq Composite down 0.49 percent as Apple shares skidded to a two-year low on concerns about iPhone demand. Investors are looking to April Chinese bank lending data later in the day, and industrial output, investment and retail sales data on Saturday to give them more clues on whether the economy's prolonged slump is bottoming out. The yen has weakened in most recent sessions as investors pared long positions and Japanese officials explicitly warned about currency intervention. Also undermining the yen, a prominent academic with close ties to BOJ Governor Haruhiko Kuroda said on Thursday that the Bank of Japan is likely to expand monetary stimulus either in June or July with an eye on first-quarter gross domestic product data and the outcome of this month's G7 summit.

The dollar's strength also sank gold, which is set for its worst weekly decline in seven weeks. The dollar was buoyed overnight as U.S. Treasury yields rose when Boston Federal Reserve President Eric Rosengren said the Fed should raise interest rates if data confirms a stronger jobs market and inflation outlook in the second quarter. He added that the markets are too pessimistic on the economy. Cleveland Fed President Loretta Mester, who has been less cautious about future rate increases than many of her colleagues, said that inflation measures have moved higher. She said any uncertainty in the Fed's economic forecasting should not stop the central bank from taking monetary policy decisions. Later on Friday, investors await a fresh set of U.S. economic readings, including retail sales data and the April producer price index. The April U.S. producer price index (PPI) is also due later in the day. The dollar could face renewed pressure against peers like the yen if U.S. economic indicators fall short of expectations, which would be a new potential headache for Japanese authorities who have managed to arrest the yen's appreciation by threatening to intervene. The United States has for years called on countries with current account surpluses to do more to lift their domestic demand, which has been perceived to be lackluster. The BOE said sterling could fall sharply and unemployment would probably rise should Britain opt to leave the European Union - its starkest warning so far of the likely impact a "Brexit" would have.

Bank of Japan Governor Haruhiko Kuroda said on Friday the central bank will act "decisively" to achieve its 2 percent inflation target, stressing that it still has "ample" policy options available if it were to expand stimulus again. Kuroda defended the BOJ's decision last month to hold off on monetary easing, saying that more time was needed to scrutinize the effects of past easing measures on the economy. But he said the BOJ would not necessarily stand pat until the policy effects on the economy are confirmed, and will guide policy in a "timely, forward-looking manner." Kuroda said uncertainty over the global economy, such as soft emerging market demand, was among the most important risks to Japan's economic outlook and could hurt business sentiment. Japan's current account surplus was largest since 2007 in March due to falling oil import costs and a hefty income surplus from overseas investment, Ministry of Finance data showed on Thursday.

Oil prices dipped in early trading on Friday as a stronger dollar weighed and Russia warned that a global crude supply overhang could last into next year. A stronger dollar, in which oil is traded, makes fuel imports more expensive for countries using other currencies, potentially hitting demand. But analysts said that declining output, especially in North America was preventing deeper price falls. U.S. crude oil production EIA has fallen 4.7 percent from 2016 peaks in January to 8.8 million barrels per day (bpd), according to U.S. Energy Information data, and output is down 8.4 percent from its 2015 peak. In Canada, crude production outages from oil sand fields following forced closures due to wildfires still stood around 1 million bpd as of Wednesday, although operators said they were gradually ramping up output. Yet top crude oil producer Russia poured cold water on the notion that recent falls in production in the Americas, Asia and Africa had wiped out a global production and storage overhang that helped pull down oil prices by over 70 percent between 2014 and early 2016. Russian Energy Minister Alexander Novak told reporters on Thursday that the global oil surplus stood at 1.5 million bpd and that the market might not balance out until the first half of 2017. Novak said he expected Russia to produce 540 million tonnes (10.81 million bpd) or more of oil this year, up from 534 million tonnes in 2015.

 

[SolidTrustMarket]

Daily Market Outlook 16 May

Buoyant Japanese stocks led Asian stocks to modest gains on Monday, helping to offset some of the gloom from soft Chinese data, while the dollar firmed against the euro and yen after receiving a boost from upbeat U.S. indicators. Hopes for more government fiscal stimulus also favored Japanese shares. It held the gains despite a denial by Japan's top government spokesman on Monday that Prime Minister Shinzo Abe has decided to delay the tax hike. Commodities were hurt as the dollar reached a two-week high against a basket of currencies on Friday's upbeat April U.S. retail sales data, which jumped 1.3 percent for the largest gain since March 2015. A stronger greenback tends to weigh on non-U.S. buyers of dollar-denominated commodities. Bank of Japan Governor Haruhiko Kuroda likes to keep markets guessing by saying one thing and doing another, but, when it comes to ruling out "helicopter money" to reanimate the economy, officials and close associates say he almost certainly means it. Despite monetary easing on an unprecedented scale over the past three years, data on Wednesday is likely to show Japan's economy barely grew in the first quarter. Fears policy makers are out of ammunition has led a growing number of overseas investors to speculate the BOJ might resort to helicopter money - an untested policy in which a central bank permanently expands the money supply that Nobel laureate Milton Friedman likened in 1969 to dropping cash from a chopper. The BOJ is already helping finance Japan's huge public debt cheaply by gobbling up government bonds at an annual pace of 80 trillion yen ($737 billion), more than double the amount newly issued each year, but it is buying them in markets.

The dollar rose to one-month highs against a basket of its major peers on Friday after stronger-than-expected reports on U.S. retail sales and consumer sentiment soothed investor concerns over the strength of the economy. The Commerce Department reported Friday that retail sales jumped 1.3% in April, topping economists’ expectations for a 0.8% increase. It was the largest monthly increase since March 2015. The dollar received an additional boost after data showing that U.S. consumer sentiment improved this month. The preliminary reading of the University of Michigan’s index of consumer sentiment came in at 95.8 in May, up from 89.0 in April and well ahead of expectations for a reading of 90.0. It was the highest reading since June 2015. The upbeat data helped ease some fears over the outlook for the U.S. economy and rekindled expectations that the Federal Reserve could raise interest rates sooner than anticipated. In the euro zone, data on Friday showed that first quarter growth was revised down slightly to 0.5% from an initial estimate of 0.6%. Annual growth also slowed slightly to 1.5%, from a previously reported 1.6%. Sterling remained under pressure after the International Monetary Fund warned Friday that a U.K. exit from the European Union could trigger a stock market crash and steep falls in house prices. In the week ahead, investors will be looking ahead to Tuesday’s data on U.S. inflation and Wednesday’s minutes of the Fed’s April meeting for clues on the path of future interest rate increases. Preliminary data from Japan on first quarter growth and jobs reports from the U.K. and Australia will also be in focus.

Oil prices jumped over 1 percent on Monday after long-time bear Goldman Sachs said the market had ended almost two years of oversupply following global oil disruptions and flipped to a deficit. Supply disruptions from Nigeria, Venezuela, the United States and China triggered a U-turn in the oil outlook of Goldman Sachs, which long warned of overflowing storage and another looming crash in prices. "The oil market has gone from nearing storage saturation to being in deficit much earlier than we expected," Goldman said, adding that the market "likely shifted into deficit in May driven by both sustained strong demand as well as sharply declining production." In Nigeria, oil major Exxon Mobil suspended exports from the country's biggest crude stream, Qua Iboe, and other producers have also suffered disruptions following acts of sabotage, cutting the country's output to its lowest in decades at around 1.65 mn bpd. In the Americas, major oil exporter Venezuela seemed on the brink of meltdown, triggering fears of default by its national oil company PDVSA, which has to make almost $5 bn in bond payments this year. Venezuela's oil production has already fallen by at least 188K bpd since the start of the year as PDVSA struggles to make the investment needed to keep output steady. In the United States, crude production C-OUT-T-EIA has fallen to 8.8 mn bpd, 8.4% below 2015 peaks as the sector suffers a wave of bankruptcies. And in China, output fell 5.6 percent to 4.04 million bpd in April, compared with the same time last year. Countering these disruptions, supply rose from the OPEC following the lifting of sanctions against Iran which triggered a race for market share between Tehran and OPEC-rivals like Saudi Arabia, Iraq, the United Arab Emirates and Kuwait. OPEC pumped 32.44 mn bpd in April, up 188K bpd from March. This is the highest since at least 2008, according to a Reuters review.

 

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Daily Market Outlook 17 May

Asian shares recovered from two-month lows on Tuesday after a rebound in technology giant Apple Corp and oil price gains boosted Wall Street. European shares are seen opening higher with spread-betters expecting 0.3-0.4 percent gains in Europe's major bourses. Euro stoxx 50 futures STXEc1 opened up 0.6 percent. Yet concerns about a slowdown in the Chinese economy could weigh on Asian shares in the near term after data published on Saturday showed investment, factory output and retail sales all grew more slowly than expected in April. In the past month, shares in Greater China were among the worst performers globally. Hong Kong, Taiwan and Shanghai shares have all registered falls of around 7 percent. Mainland Chinese shares were flat, with Shanghai composite index .SSEC still hovering near two-month low hit last week, as investors fret that Beijing might pull back on monetary stimulus, focusing on structural and financial reforms even as the economic recovery struggles to gain traction.

The dollar edged down slightly in Asian trading on Tuesday, while the Australian dollar soared after central bank minutes reduced expectations of an interest rate cut. The Aussie was already bolstered by a rebound in crude oil futures. U.S. crude hit a six-month high, as the market focused on supply disruptions that prompted long-time bear Goldman Sachs to issue a more bullish assessment. Minutes of the Reserve Bank of Australia's (RBA) May policy meeting, at which policymakers reduced the cash rate by a quarter point to a record low 1.75 percent, were less dovish than some had anticipated. Use of the word "persuaded" in the minutes suggests some members needed to be convinced that an easing would improve prospects for sustainable growth and inflation returning to target over time, he said. The G7 meeting could expose a rift on issues ranging from currency and fiscal policies within the group of advanced economies, dashing Japan's hopes for a coordinated policy response. European Central Bank Governing Council member Jens Weidmann told a German newspaper that recent strong criticism of the central bank's monetary measures may be the result of some measures having blurred the lines between monetary and fiscal policy. On the U.S. data front, New York's Empire State survey was weaker than expected, coming in at its lowest level since February. But few investors used it as an excuse to sell the greenback. Richmond Fed President Jeffrey Lacker told the Washington Post in an interview published on Monday that the central bank should consider raising rates at its June meeting. But Lacker is not a voting member of the Fed's policy-making board this year, and markets have all but priced out a move next month. Fed funds futures rates show investors see only a 4 percent chance the Fed will raise interest rates at its upcoming June policy meeting and market pricing indicates an increase will not occur until early 2017, according to CME Group's FedWatch tool. But many investors believe the next hike will come later this year.

Oil prices were at six-month highs as the market focused on supply disruptions that prompted long-time bear Goldman Sachs to issue a bullish assessment on near-term prices. Goldman had long warned of global storage hitting capacity and of another oil price crash to as low as $20 per barrel. A combination of Nigerian, Venezuelan and other outages, declining U.S. production and virtually frozen inflows of Canadian crude after wildfires in Alberta's oil sands region helped to lift oil prices. oil futures rose for a second straight session on Tuesday, with U.S. crude hitting a six-month high, as the market focused on supply disruptions that prompted long-time bear Goldman Sachs to issue a bullish assessment on near-term prices. The disruptions triggered a U-turn in the outlook for the oil market from Goldman Sachs. The U.S. bank, which had long warned of global storage hitting capacity and of another oil price crash to as low as $20, now sees U.S. crude trading as high as $50 in the second half of 2016. A further bullish note was sounded by the U.S. Energy Information Administration (EIA) when it said shale oil output is expected to drop in June for an eighth consecutive month. Shale output is expected to fall by nearly 113,000 bpd to 4.85 million bpd, as the nearly two-year slump in prices continues to undermine profitability at drillers, the EIA report released on Monday shows.

 

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Daily Market Outlook 18 May

Asian shares weakened on Wednesday in the wake of accelerating U.S. inflation and comments from Federal Reserve officials that rekindled prospects of an interest rate rise as early as June. Markets are now looking to Prime Minister Shinzo Abe's meeting with his coalition party leader, where he could discuss postponing a planned sales tax hike to support the flagging economy. Other data on Tuesday showed housing starts and industrial production rebounded strongly last month, adding to the case for an early rate hike. A few Federal Reserve policymakers repeated their mantra that there could be two rate increases or more. Atlanta Fed President Dennis Lockhart, seen as a policy centrist on the board, said on Tuesday that he still assumes there will be two to three rate hikes, a view echoed by San Francisco Fed President John Williams. Dallas Fed President Robert Kaplan, seen as a hawk, said he will push for an interest rate hike in June or July. "They set (Fed Chair Janet) Yellen's speech on June 6, just after the next payroll data and just before the blackout period will start before the next policy meeting. They wouldn't have to do this if they have no plan to raise rates in June," he added.

The U.S. dollar rose on the rising expectations of a Fed rate hike, but gains were capped as many market players looked to the Group of Seven finance chiefs meeting later this week. Dallas Federal Reserve Bank President Robert Kaplan said on Tuesday that while he expects more bankruptcies for oil and gas producers this year, he sees energy prices firming, along with prospects for jobs and investment. “I wouldn’t be surprised to see firming prices in the period ahead,” “That doesn’t mean that 2016 is going to be an easy year ... there are still going to be companies that are going to have to be restructured.” The biggest U.S. energy price crash in decades has forced more than 60 North American oil and gas producers to seek protection from creditors since early 2015, including two this week.

Oil prices were trading near 2016 highs on Wednesday, as supply disruptions and output cuts continued to tighten the market, although traders cautioned that high global crude inventories were still weighing on markets. The U.S. Energy Information Administration (EIA) is scheduled to release official storage data later on Wednesday. The oil industry is also keeping an eye on Venezuela, where economic and political turmoil is threatening oil production. Despite the disruptions, BNP Paribas said that there was still a large storage overhang that would have to be reduced before the market could swing back into balance. Hundreds of drilling rigs have been idled in the Permian Basin since the price of crude dropped from its peak in mid-2014, pushing the basin's rig count down to just 130 in April. But data from Baker Hughes and Drilling Info show several rigs have been added in the last two weeks alone.

EUR/USD was virtually flat on Tuesday, as investors digested hawkish signals from the Federal Reserve on the increased likelihood of multiple interest rate hikes from the U.S. central bank this year despite the release of subdued core inflation figures earlier in the session. On Tuesday morning, the U.S. Department of Labor's Bureau of Labor Statistics (BLS) said its Consumer Price Index (CPI) rose by 0.4% in April, slightly above consensus forecasts of a 0.3% rise. Consumer prices accelerated last month after a modest 0.1% gain in March. A surge in gasoline prices by nearly 10% drove the gains, as April CPI rose by 1.1% on a yearly basis, up from 0.9% a month earlier. As a result the Core CPI Index, which strips out volatile food and energy prices, rose by 0.2% in line with consensus estimates. On an annual basis, the core index is up by 2.1% in comparison with its reading from April, 2015. It represents a slight decline from March when core prices increased by 2.2% on a yearly basis. By comparison, the Core PCE Index inched down to 1.6% two months ago. The Core PCE Index, which also discounts food and energy prices, is the Fed's preferred gauge of inflation. As the Fed looks for signs that persistently sluggish inflation is firming, the reading has remained below its targeted goal of 2% in every month over the last three years. The dollar also received only a slight boost from hawkish comments by a pair of Fed policymakers on Tuesday, regarding the increased possibility that the FOMC could raise short-term rates multiple times before the start of 2017. At a joint appearance in Washington, both Atlanta Fed president Dennis Lockhart and San Francisco Fed president John Williams suggested that "two to three rate hikes," seem possible, while Lockhart noted that a rate hike will still remain on the table at the FOMC's next meeting. Neither Lockhart, nor Williams own a vote in the current policy cycle. Any rate hikes by the FOMC this year are viewed as bullish for the dollar, as foreign investors pile into the greenback in order to capitalize on higher yields.

 

[SolidTrustMarket]

Daily Market Outlook 19 May

Asian stocks fell and the U.S. dollar stood tall on Thursday as markets scrambled to factor in the possibility of another interest rate increase by the Federal Reserve as early as June. Gold stumbled. Moody's Investor Services said in a note rising leverage in China and emerging markets in general is an even greater concern now that the possibility of another U.S. interest rate hike this summer is back on the table. The Fed minutes highlighted policymakers' views that it would be appropriate to raise interest rates in June if economic data points to stronger second-quarter growth as well as firming inflation and employment. Such views helped revive the prospect of a rate hike in June, which had been dismissed by many investors. Nonetheless, many in the market are still skeptical the Fed would raise rates ahead of Britain's June 23 referendum on whether to remain in the European Union, a risk that was noted by some Fed policymakers. July may be a stronger possibility. Fed Vice Chairs William Dudley and Stanley Fischer are due to speak later in the day and the markets will be eager to get more details on the Fed's thinking. Even though the ratings agency has kept its growth forecast for China unchanged at 6.3 percent for this year, it said headline growth continues to be supported by increasing amounts of debt which could lead to more problems down the road. China has set an economic growth target of 6.5 percent to 7 percent this year, after growth cooled to a 25-year low of 6.9 percent in 2015. China may suffer from a financial crisis and economic recession if the government relies too much on debt-fueled stimulus, the official People's Daily quoted an "authoritative person" as saying last week. Rising leverage in China and emerging markets in general is an even greater concern now that the possibility of another U.S. interest rate hike this summer is back on the table. Higher rates will sap the ability of borrowers, especially commodity exporters, to make repayments at a time when global prices have crashed. Emerging market corporate balance sheets are therefore likely to come under further pressure from debt payments and further currency volatility if the U.S. dollar continues to strengthen, Moody's said.

Federal Reserve officials felt the U.S. economy could be ready for another interest rate increase in June, according to the minutes from the central bank's April policy meeting released on Wednesday. Most participants in the policy-setting committee's April 26-27 meeting said they wanted to see signs that economic growth was picking up in the second quarter and that employment and inflation were firming, the minutes showed. The suggestion that a rate increase in June is firmly on the table suggests the Fed is closer to tightening monetary policy again than Wall Street had expected. The Fed lifted rates in December for the first time in nearly a decade. Prices for futures contracts on the Fed's benchmark overnight lending rate implied that investors saw a 34 percent chance of a rate increase next month, up from 19 percent shortly before the release of the minutes, according to CME Group. Recent data has made policymakers more confident that inflation is rising toward the Fed's 2 percent target and they also expressed fewer concerns about a global economic slowdown, according to the minutes. Some policymakers at the meeting were worried about a slowdown in U.S. economic growth during the first quarter, when gross domestic product expanded at an annual rate of 0.5 percent, a two-year low. But others argued that ongoing robust job growth suggested the economy had not gone off the track and that the growth data could be flawed. Data since the end of April has pointed to a pickup in consumer spending and manufacturing output, bolstering the view that economic growth was accelerating after stalling in the first quarter. Several Fed officials in recent weeks have stressed that a rate increase might be warranted in June.

Oil prices fell on Thursday, pulled down by rising U.S. crude inventories, a stronger dollar and surging output from Iran to Europe and Asia. But the bull-run ended after the U.S. Energy Information Administration (EIA) published data showing an unexpected 1.31 million barrel rise in U.S. crude stocks to 541.29 million barrels. The inventory build came despite another fall in U.S. crude oil production to 8.79 million barrels per day (bpd) C-OUT-T-EIA, down from a peak of over 9.6 million bpd last year. Surging oil exports from Iran after sanctions against it were lifted in January also dragged. Iran's oil exports are set to jump nearly 60 percent in May from a year ago to 2.1 mn bpd. The rises suggest that the country's logistical problems following years of sanctions have been overcome or were less severe than thought. Despite Thursday's price falls, analysts said that global supply disruptions still loomed. Overall, traders said that global oil markets would likely remain in a slight production surplus of between 0.1 and 1 million bpd this year, compared with a glut of as much as 2.5 million bpd in 2015.

 

[SolidTrustMarket]

Daily Market Outlook 20 May

Asian shares edged up on Friday but were on track for a weekly loss, while the dollar was poised for a winning week on bets the U.S. Federal Reserve could raise rates as early as next month. The New York Fed's William Dudley, a permanent voting member of the central bank's rate-setting committee, said there was a strong sense among Fed officials that markets were underestimating the probability of policy tightening and that the bank was on track for a rate hike in June or July. Dudley said he was "quite pleased" investors had apparently increased bets that a rate hike would come soon. Dudley's comments came a day after minutes of the Fed's April meeting revealed that most policymakers felt a rate increase might be appropriate as early as June. The sterling advanced as strong retail sales data reduced chances of an interest rate cut by the Bank of England, and polls showed growing support for Britain to remain in the European Union. Currencies are likely to be a topic at the G7 finance leaders' meeting in Japan on Friday and Saturday. The meeting could expose a rift on issues ranging from currency to fiscal policies within the group of advanced economies.

The number of Americans filing for unemployment aid fell from a 14-month high last week, the latest sign the economy was picking up speed in the second quarter and likely would be healthy enough for the Federal Reserve to raise interest rates in June. The economic outlook got a further boost from another report on Thursday showing a gauge of future activity jumped in April. The reports followed recent upbeat data on retail sales, home building and industrial production. Minutes from the Fed's April 26-27 policy meeting, published on Wednesday, showed most officials considered it appropriate to raise rates next month if data continued to point to an improvement in second-quarter growth. The Fed raised its benchmark overnight interest rate in December for the first time in nearly a decade. Initial claims for state unemployment benefits declined 16,000 to a seasonally adjusted 278,000 for the week ended May 14, the Labor Department said. That was the biggest drop since February and snapped a three-week string of increases. Claims have now been below 300,000, a threshold associated with a strong job market, for 63 straight weeks, the longest stretch since 1973. Jobless claims had risen since mid-April, with economists blaming a variety of factors, including the different timing of school spring breaks, which often makes it difficult to adjust the data around this time of the year. The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 7,500 to 275,750 last week. The claims data covered the survey week for May's nonfarm payrolls. The four-week average of claims increased 15,000 between the April and May survey periods, suggesting little change in employment gains after the economy added 160,000 jobs last month. In a third report, the Philadelphia Federal Reserve said its business conditions index fell to minus 1.8 this month from a reading of minus 1.6 in April. The index, which surged in March, has registered a negative reading in eight of the last nine months. Details of the survey were mixed, with a measure of new orders contracting after being flat in April.

Oil prices rose in early trading on Friday as turmoil in Nigeria, shale bankruptcies in the United States and crisis in Venezuela all contributed to tightening supplies. Despite this, brimming inventories across the world were preventing supply shortfalls and sharper price spikes, traders said. ANZ bank said that unexpected supply disruptions across the world, excluding output falls in the United States, amounted to around 2.5 million barrels of daily production, virtually erasing a production overhang that had pulled down prices by over 70 percent between 2014 and early 2016. Nigeria's oil production showed further signs of strain on Thursday as intruders blocked access to Exxon Mobil's XOM.N terminal exporting Qua Iboe, the country's largest crude stream. Libyan output has also been hit by internal conflict. Militant activity in the oil-rich Niger Delta has taken out some 500,000 barrels per day of crude oil production from other companies in Nigeria, pushing oil output in Africa's largest-producing nation to more than 22-year lows. In North America, U.S. crude oil output has fallen 8.79 million barrels per day (bpd), down from a peak of more than 9.6 million bpd last year, as a wave of bankruptcies hits producers. Venezuelan crude oil output fell to around 2.53 million bpd in the first quarter of 2016 compared with 2.72 million bpd in the same quarter of last year, data from the Organization of the Petroleum Exporting Countries (OPEC) showed. Despite the disruptions oil supplies to customers are not at risk, thanks to ongoing high output in the Middle East and Russia, and because of brimming oil inventories across the world, including the United States and Asia.

 

[SolidTrustMarket]

Daily Market Outlook 24 May

Asian shares stumbled to near 2-1/2-month lows on Tuesday and the U.S. dollar pared some of its recent losses as investors worried about the likelihood of a U.S. interest rate increase in coming weeks. A string of comments in recent weeks by Federal Reserve officials and minutes of the last Fed meeting have put a possible rate hike firmly on the table for June or July, reviving the dollar but cooling appetite for riskier assets, even if markets are not totally convinced a tightening will come so soon. Philadelphia Fed President Patrick Harker said on Monday that a hike in June is appropriate unless data weakens, while St. Louis Fed President James Bullard said holding rates too low for too long could cause financial instability. With economic growth across emerging markets showing fresh signs of flagging - ratings agency Moody's expects growth in G20 emerging markets to ease to 4.2 percent in 2016 compared to 4.4 percent last year - investors are growing more bearish on the outlook for stocks. Yang Hai, analyst at Kaiyuan Securities, said trading will likely remain dull for a while as economic sluggishness discourages investor participation.

The dollar trimmed some of its losses against the yen after skidding nearly 1 percent in the previous session to a low of 109.12. Data on Monday showed Japan posted a trade surplus for the third consecutive month, and a Group of Seven finance ministers' meeting concluded on Saturday with a U.S. warning to Japan against intervention to weaken the yen. But overall, the dollar was bolstered by growing bets that the Fed was gearing up to raise interest rates sooner than many investors had expected, despite signs of persistent global weakness. Fed Chair Janet Yellen will appear at a panel at Harvard University on Friday, a day on which investors will also see the second estimate of U.S. first-quarter growth. Markets also await comments from other Fed officials this week, as well as data on new home sales, durable goods orders and consumer sentiment. U.S. interest rates being kept too low for too long could cause financial instability in future and stronger market expectations for a rate rise are "probably good", St. Louis Federal Reserve President James Bullard said on Monday. A relatively tight labor market in the United States may also exert upward pressure on inflation, raising the case for higher interest rates, Bullard added. His comments come as financial markets have increased expectations for a U.S. interest rate hike in June or July and a range of policymakers are now stating that a rise is firmly on the table for the next policy meeting in June. "I do worry that keeping rates too low for too long could feed into future financial instability even if it doesn't look like we're in that situation today," Bullard, a voting member of the Fed's policy-setting committee, told reporters. Dollar/yen showed little response after Japanese Finance Minister Taro Aso said in parliament that it would be good if the pair settled around 109 yen. A decline in global equities at the start of the week has given an added lift to the safe-haven yen, which recently soared to an 18-month high of 105.55 to the dollar after the Bank of Japan stood pat on monetary policy. Hawkish comments from Fed officials overnight such as St. Louis Fed President James Bullard and San Francisco Fed President John Williams have done little to support the dollar against its Japanese counterpart.

Oil prices fell in thin trade on Tuesday as the U.S. dollar strengthened, but losses were curbed by a likely drawdown in U.S. crude and gasoline stockpiles. That led to volatile plays in the previous session with oil falling by around $1 before retracing much of the day's losses. U.S. commercial crude oil stocks likely fell by around 2.5 million barrels to 538.8 million in the week ended May 20, a preliminary Reuters analysts' poll taken ahead of weekly industry and official inventory data showed on Monday. Gasoline stocks probably dropped 1.3 million barrels last week, while distillate inventories, which include heating oil and diesel fuel, likely decreased by a million barrels, the poll showed. The United States is gearing up for its summer driving season. The American Petroleum Institute (API) is due to release inventory data on Tuesday, while figures from the U.S. Department of Energy's Energy Information Administration (EIA) will come on Wednesday. Just 2.8 billion barrels of oil was discovered outside North America in 2015, the lowest since 1952, following a sharp fall in exploration and appraisal drilling, consultant IHS said in a report on Tuesday. Including the United States, that figure rose to 12.1 billion, where the rapid expansion of the onshore shale industry unlocked major resources over the past decade, but was still the lowest since 1952, Morgan Stanley said in a separate report on Monday. Meanwhile, crude exports from Iraq's southern oil fields have fallen by more than 200,000 barrels per day (bpd) to around 3.15 million barrels so far in May, according to an industry source and loading data.

 

[SolidTrustMarket]

Daily Market Outlook 26 May

The yen surged on Thursday, taking some of the wind out of the sails of the recently buoyant dollar and prompting investors to cover positions against a backdrop of potential event risks, including a speech by Federal Reserve chief Janet Yellen. The dollar earlier had stuck close to recent ranges, as investors looked for Yellen to provide clues on Friday as to whether a U.S. rate increase is imminent, and awaited clarity from Japan on whether it would press ahead with planned sales tax hike next year. Fed Chair Yellen is due to speak on Friday, and could reinforce expectations that the central bank might raise interest rates as early as next month, or July. Hawkish minutes from the Fed's April policy meeting and comments by several policymakers hinted that a hike could be forthcoming.

Masatsugu Asakawa, Japan's vice-minister of finance for international affairs, who told the Financial Times that direct currency intervention will remain in the ministry's toolbox. Other traders, who did not see any fresh trading catalysts, said they were forced to buy back the Japanese unit as it rapidly shot up against other currency pairs as well as the dollar. While Japanese officials have publicly railed against the yen's rapid appreciation to 18-month highs earlier this month, some economic policymakers have told Reuters they are not so worried that the yen will derail efforts to revive exports and the economy. In addition to talk of currency intervention, investors have been eager for any developments about the timing of Japan's sales tax increase. Japanese Finance Minister Taro Aso said on Wednesday that he told his G7 counterparts at a finance leaders' meeting last week that Japan will raise the tax as planned. But he did not say whether that meant Japan has officially pledged to the international community that it will go ahead with the increase. Japan's top government spokesman on Wednesday denied a newspaper report that Prime Minister Shinzo Abe is likely to delay the sales tax hike now scheduled for next year. Markets were also keeping an eye on the Group of Seven leaders summit meeting in Japan. Concerns about the health of the global economy are likely to be a key topic among the participants, although full agreement on macroeconomic policy looks elusive. The G7 leaders are also expected to reaffirm their previous commitment to stability in the foreign exchange market.

Bearish sentiment toward emerging Asian currencies deepened in the last two weeks as speculation of an imminent U.S. interest rate hike grew and as confusion flared again over China's foreign exchange policy, a Reuters poll showed on Thursday. Top Federal Reserve officials have recently suggested the U.S. central bank may raise borrowing costs as early as June or July on encouraging economic data, boosting the dollar and forcing global investors to price in a near-term tightening. Markets had seen the odds for a June hike at almost zero after Federal Reserve Chair Janet Yellen said in late March that the central bank may not hurry to raise interest rates. The renminbi on Wednesday hit a 3-1/2-month low as China's central bank set its daily guidance rate at a five-year trough, reflecting the dollar's broad strength. The People's Bank of China has often fixed the midpoint in line with the greenback's movements. Worries are also growing that a promising improvement seen in Chinese economic data earlier this year may be fizzling out.

Brent oil futures climbed above $50 a barrel on Thursday for the first time in nearly seven months, boosted after U.S. government figures showed a sharper-than-expected drawdown in crude stocks last week U.S. crude stocks fell 4.2 million barrels to 537.1 million in the week to May 20, the steepest weekly drop in seven weeks, the U.S. Department of Energy's EIA said on Wednesday. That was larger than analyst expectations of a 2.5 million-barrel fall, but not as much as the 5.1 million expected by trade group, the American Petroleum Institute. Gasoline stocks rose 2 million barrels to 240.1 million barrels against forecasts of a 1.1 million-barrel drop, while gasoline demand over a four-week average rose 3.9 percent to 9.6 million barrels last week, the EIA said. Ric Spooner, chief market analyst at Sydney's CMC Markets, said the world was still oversupplied with oil even with increased demand and supply disruptions from Canadian wildfires and violence in Libya and Nigeria. BMI Research said in a report on Thursday that Indonesia, Malaysia and Vietnam would turn into net crude importers over the next five years as they, together with Brunei and Cambodia, add 500,000 barrels per day (b/d) of refining capacity over the next decade. Market players are awaiting comments by Fed Chair Janet Yellen at a Harvard University event on Friday, though many also say her speech scheduled for June 6 - after new U.S. payrolls data comes out - would be even more crucial. Recent comments by Fed policymakers have put a possible rate hike this summer firmly on the table for discussion, but U.S. interest rate futures are still pricing in only about one-third chance of a rate hike in June and about a 60 percent likelihood by July.

 

[SolidTrustMarket]

Daily Market Outlook 30 May

St. Louis Federal Reserve President James Bullard said on Monday global markets appear to be "well-prepared" for a summer interest rate hike from the Fed, although he did not specify a date for the policy move. "My sense is that markets are well-prepared for a possible rate increase globally, and that this is not too surprising given our liftoff from December and the policy of the committee which has been to try to normalize rates slowly and gradually over time," Bullard told a news conference after speaking at an academic conference in Seoul. Bullard added a rebound in U.S. GDP growth seems to be materializing in the second quarter, but reserved his opinion on whether the Fed should hike in June or July for the next policy meeting at the U.S. central bank. His comments followed revised data on Friday that showed first quarter growth in the U.S. was not as weak as initially expected. Responding to the GDP data, economists said strong income growth, together with signs the economy was picking up steam in the second quarter, could give the Federal Reserve ammunition to raise interest rates as early as next month. Answering a question on whether he thought U.S. presidential candidate Donald Trump would bring change to monetary policy if elected, Bullard said the Fed was independent and did not follow any particular political prescription. "I don't think a change in the White House either way will affect Fed policy," he said.

Asian shares slipped on Monday while the dollar marked fresh highs after Federal Reserve Chair Janet Yellen suggested that an interest rate hike could be around the corner. The dollar rallied against Asian currencies early on Monday after the revised GDP data and on Fed Chair Janet Yellen's comments on Friday that a rate hike in the U.S. in coming months would be appropriate. The Fed should raise interest rates "in the coming months" if economic growth picks up and the labor market continues to improve, Yellen said on Friday. Japanese Prime Minister Shinzo Abe said he would delay the increase by 2-1/2 years, Masahiko Komura, vice president of the ruling Liberal Democratic Party, told reporters on Monday, echoing what a government source told Reuters on Sunday. On Friday, Wall Street posted daily and weekly gains ahead of a three-day weekend in the United States, due to Monday's Memorial Day holiday. While higher U.S. interest rates could sap global liquidity, Yellen's comments were taken in stride by Wall Street as they suggested the U.S. economy was strong enough to weather another rate increase, following from the December hike. Her comments also were largely in tune with a chorus of other Fed officials who have indicated in recent weeks that policymakers could resume raising rates as soon as next month. The probability of a rate increase at the Federal Open Market Committee's June 14-15 meeting rose to 34 percent from 30 percent before Yellen's remarks, according to CME Group. Market bets on a rate increase at the July 26-27 policy meeting edged up to 60 percent, more than double the estimate from a month ago. The dollar also got a lift from revised U.S. gross domestic product data for the first quarter released on Friday, that showed that growth did not slow as much as first estimated. Because of Yellen's emphasis on the labor market, the U.S. nonfarm payrolls report on Friday will attract more than the usual attention. Economists expect U.S. employers to have added 170,000 jobs in May, slightly more than they did in April, and hourly wages to show a 0.2 percent increase from the previous month. The euro wallowed around 2-1/2 month lows, edging down 0.1 percent to $1.1104. The European Central Bank will meet on Thursday, and is expected to keep interest rates on hold and reaffirm its focus on implementing its stimulus package announced in March.

Oil prices dipped on Monday as a strong dollar weighed on markets and Canadian oil sands production was expected to increase this week. Crude markets, however, did receive some support from the start of the U.S. summer driving season coinciding with a fall in U.S. crude output to its lowest since September 2014. Oil producer Suncor Energy is planning to ramp up output at its fields in Alberta this week after it was forced to shut them down earlier in May due to massive wildfires. Traders said the official start to the U.S. peak demand summer driving season, which kicks off with Memorial Day on Monday, was the main reason for rising seasonal demand. This also came just as U.S. oil production fell to 8.77 million barrels per day (bpd), the lowest level since September 2014, and down 8.77 percent since a June 2015 peak. "The yoy (year-on-year) declines in production would be 470,000 bpd in 2016 and 305,000 bpd in 2017 if we account for the impact of the estimated county-level well backlog being gradually brought back online between June 2016 and December 2016," Goldman Sachs said. In global oil markets, Brent prices have been supported by a series of supply disruptions in Nigeria, where militants have been staging a wave of attacks on oil pipelines, cutting the country's output to the lowest in more than two decades. Attention will also be on a meeting by the Organization of the Petroleum Exporting Countries (OPEC) in Vienna this week, although most analysts do not expect any decisions that would lead to changes in production.

 

[SolidTrustMarket]

Daily Market Outlook 31 May

Asian shares recovered from a wobbly start on Tuesday, but remained on track for a monthly loss, while the dollar edged away from recent peaks scaled on expectations the U.S. Federal Reserve will raise interest rates as soon as next month. Data released earlier in the session showed Japanese industrial output unexpectedly rose 0.3 percent in April, suggesting production is holding up despite weak exports and the impact from a series of earthquakes that struck southern Japan during that month. Underpinning Asian sentiment, European shares hit one-month highs on Monday amid otherwise light trade with markets in London and New York closed for public holidays. The data tempered expectations that the Bank of Japan could expand its stimulus as soon as in June after Japanese Prime Minister Shinzo Abe pitched a plan on Monday to delay next year's sales tax hike to fellow ruling party members. Although some of them expressed concerns that such a move would signal a failure of his policies to reflate the economy out of stagnation, Abe is widely expected to have his way.

The dollar has surged recently on expectations of higher U.S. interest rates after Fed Chair Janet Yellen said on Friday that the central bank should hike rates "in the coming months" if economic growth picks up and the labour market continues to improve. Against that backdrop, the May U.S. private-sector ISM manufacturing data, due Wednesday, and non-farm payrolls report on Friday will garner even more attention than usual. Solid readings could further heighten expectations for a move as soon as the Federal Reserve's next policy meeting on June 14-15. Economists predict the jobs report will show that U.S. employers added 170,000 jobs, slightly more than they did in April. Hourly wages are expected to show a 0.2 percent increase from the previous month. If U.S. payrolls due on Friday show solid job growth and if Yellen signals a rate hike in her speech on the following Monday, the dollar could break above the previous April peaks, said Koichi Takamatsu, manager of forex at Nomura Securities. But that scenario may not materialise if the spectre of a U.S. rate hike hurts broader risk sentiment and push down prices of riskier assets, Takamatsu also said. In such cases, traders also buy the yen, which tends to be bought at time of financial stress because investors unwind yen-funded positions. The sterling has been supported in recent weeks by polls showing that Britons are leaning towards voting to remain in the European Union at next month's referendum. Yet the pound's implied volatilities haven't fallen, suggesting market players are still cautious about the referendum on June 23. Still, it looks set to become the worst performer among so-called G10 currencies this month, having declined 4.8%, after the Reserve Bank of Australia's rate cut early this month started a fresh downtrend.

St. Louis Federal Reserve President James Bullard said on Monday global markets appear to be "well-prepared" for a summer interest rate hike from the Fed, although he did not specify a date for the policy move. "My sense is that markets are well-prepared for a possible rate increase globally, and that this is not too surprising given our liftoff from December and the policy of the committee which has been to try to normalize rates slowly and gradually over time," Bullard told a news conference after speaking at an academic conference in Seoul. "So my ideal is that if all goes well this will come off very smoothly." Bullard added a rebound in U.S. GDP growth seems to be materializing in the second quarter, but reserved his opinion on whether the Fed should hike in June or July for the next policy meeting at the U.S. central bank. His comments followed revised data on Friday that showed first quarter growth in the U.S. was not as weak as initially expected. U.S. oil prices were lifted early on Tuesday by the start of the peak demand summer driving season, although international fuel markets were weighed down by rising output in the Middle East, which mostly serves Asian customers. Demand in North America is set to pick up along with the official start of the U.S. summer driving season this week, triggering a cut in the amount of open short crude positions that would profit from falling prices. International oil markets, however, were hit by a rise in Middle Eastern crude exports, most of which go to Asia. Iraq will supply 5 million barrels of extra crude to its partners in June, industry sources familiar with the issue said, joining other Middle East producers by lifting market share ahead of an OPEC meeting this week. Iraq, which is the second-largest producer in the Organization of Petroleum Exporting Countries, had already been targeting record crude export volumes from southern terminals next month of 3.47 million barrels per day. Saudi Arabia, the world's top crude exporter, as well as fellow OPEC producers Kuwait, Iran and the United Arab Emirates, also plan to raise supplies in the third quarter in an ongoing race for market share in the world's biggest consumer region, Asia.

 

[SolidTrustMarket]

Daily Market Outlook 2 June

Asian stocks eased on Thursday after surveys showed global manufacturing activity and demand remain weak, while a jump in the yen sent Japan's Nikkei reeling more than 2 percent. Factory surveys over the past 24 hours highlighted a sluggish global economy, even as the U.S. Federal Reserve appears to be preparing jittery financial markets for a possible interest rate hike in coming months. The global economy is stuck in a "low growth trap", the Organisation for Economic Co-operation and Development (OECD) said on Wednesday, urging governments to boost spending. Japan's Nikkei fell 2.3 percent after the dollar sunk to a two-week low against the yen overnight following Japanese Prime Minister Shinzo Abe's official announcement of a widely expected delay in a sales tax increase next year. A spate of decent U.S. economic data on Wednesday failed to lift Asian markets or reveal any fresh clues as to when the U.S. Federal Reserve might opt to raise interest rates, after officials hinted such an increase could come as early as June. Market turnover has trended lower in recent days as investors stayed on the sidelines awaiting more clues on the future trend of U.S. monetary policy. Friday's key U.S. nonfarm payrolls report will be watched for the latest clues on the strength of the labour market recovery. Inflation pressures grew slightly across most of the United States from April to mid-May, the Federal Reserve said on Wednesday in a report that also pointed to rising labor costs for American companies.

The Fed's Beige Book, a collection of anecdotal information from business contacts nationwide, found that labor markets appeared to be tightening despite "modest" job growth. "Tight labor markets were widely noted in most districts," the Fed said, referring to the U.S. central bank's 12 regional branches. "Price pressure grew slightly in most districts." The report could make Fed policymakers more comfortable that inflation is on track to rise back to the central bank's 2 percent target as they consider whether to raise interest rates in the coming months. Tighter labor markets appear to be fuelling higher wages for entry-level and lower-skill positions in parts of the South, while companies reported more wage pressures for higher skilled employees in the West and parts of the Midwest, according to the report. In the New York district, which includes the New England states, a sizable share of contacts in the service sector reported higher wages. Rising wages are seen by many economists as a harbinger of faster rates of inflation.

U.S. manufacturing grew for a third straight month in May, but factories appeared to be taking in fewer deliveries from their suppliers, which could hamper production in the months ahead. Other data on Wednesday showed automobile sales slowing last month and a sharp drop in construction spending in April, bucking the recent flow of relatively strong data that suggested economic growth was regaining speed in the second quarter. The Institute for Supply Management (ISM) said its index of national factory activity rose half a percentage point to a reading of 51.3 last month, with a jump in prices paid by factories for raw materials also accounting for the increase. The ISM's supplier deliveries sub-index surged five points to a reading of 54.1 last month. New orders received by factories were little changed in May, production tumbled and order backlogs shrank. New export orders were unchanged and factory employment continued to contract. There was also an increase in the number of manufacturers reporting that customers' inventories were too high. A third report from the Commerce Department showed construction spending tumbled 1.8 percent, the largest decline since January 2011, after an upwardly revised 1.5 percent jump in March. Construction spending was previously reported to have increased 0.3 percent in March.

Oil prices were steady on Thursday on mixed market signals ahead of an OPEC meeting in Vienna, which analysts said was not expected to result in restrictions on crude output. The Organization of the Petroleum Exporting Countries (OPEC) is set for another showdown between rivals Saudi Arabia and Iran when it meets on Thursday in the Austrian capital, with Riyadh trying to revive coordinated action or a formal oil output target, but Tehran refusing to cooperate. "An output ceiling has no benefit to us," said Iranian Oil Minister Bijan Zanganeh as the country tries to recoup lost market share following the lifting of sanctions against it in January. Despite rising output by OPEC's Middle Eastern producers, the group's overall production has remained largely flat this year, currently standing at 32.5 million barrels per day (bpd), capped by disruptions especially in Nigeria, Libya and Venezuela. Because of supply disruptions elsewhere, the Middle East's low cost producers see little reason to restrain output as overall market conditions have improved significantly for them this year. Despite this, producers are eyeing China's slowing ecoomy with concern.

 

[SolidTrustMarket]

Daily Market Outlook 3 June

Asian shares advanced on Friday as traders awaited U.S. jobs data later in the day, with subdued activity in many markets underscoring investor wariness over rising prospects of a near-term Federal Reserve rate hike. Markets expect U.S. employment data due at 1230 GMT to show a non-farm payroll increase of about 164,000 and 0.2 percent rise in average wage earnings in May. The data will be followed by a speech from Federal Reserve Chair Janet Yellen on Monday, the last chance for the Fed to communicate with markets before it begins a blackout period ahead of its policy meeting on June 14-15. In recent weeks global markets have been puzzling over what the Fed will do in the near term as relatively upbeat U.S. data have been eclipsed by a still-sluggish global economy and worries over the risk of Britain exiting the European Union. The uncertain global backdrop was underlined by the European Central Bank, which on Thursday predicted consumer price growth would remain below target through 2018 as it struggles with cheap energy feeding into the price of other goods and services. The ECB kept its negative rates unchanged, with President Mario Draghi saying stimulus from previously approved and yet to be implemented measures were expected to work its way through the system. The yen gained 0.2 percent to 108.645 per dollar, after hitting a two-week high of 108.5 earlier in the session, a move some market players attributed to disappointment over a lack of a clear plan on stimulus from Japanese Prime Minister Shinzo Abe. It is poised for a gain of 1.6 percent for the week. The yen tends to strengthen when there is bad news on the economy because it is often used as a funding currency for investment in higher-yielding riskier assets.

A strike by Verizon workers likely crimped U.S. job gains in May, but employment growth should still be strong enough to confirm a tightening labor market and push the Federal Reserve closer to raising interest rates soon. Nonfarm payrolls probably increased by 164,000 jobs in May after rising by 160,000 in April, according to a Reuters survey of economists ahead of Friday's closely watched employment report. The jobless rate is forecast slipping one-tenth of a percentage point to 4.9 percent. A government report last week suggested a month-long strike by Verizon workers could slice 35,100 jobs from payrolls in May. The striking workers, who returned to their jobs on Wednesday, were regarded as unemployed because they did not receive a salary during the payrolls survey week. Without the strike, employment would probably have risen by about 200,000 jobs, matching the monthly average for the first quarter. Economists and Fed Chair Janet Yellen say monthly gains of roughly 100,000 jobs are needed to keep up with growth in the work-age population. The Labor Department is scheduled to release the jobs data at 8:30 a.m. EDT (1230 GMT). It will likely confirm the economy has bounced back after growth almost stalled at the start of the year. Yellen said last week that a rate increase would probably be appropriate in the "coming months," if those conditions were met. Data on consumer spending, industrial production, goods exports and housing have suggested the economy is gathering speed after growth slowed to a 0.8 percent annualized rate in the first quarter. Financial markets see a small chance of a rate increase at the Fed's June 14-15 policy meeting, but are pricing in a roughly 59 percent probability at the July gathering, according to CME Group's FedWatch program. The Fed hiked its benchmark overnight interest rate in December for the first time in nearly a decade.

Brent oil prices held around $50 a barrel on Friday following an OPEC meeting that failed to agree on output targets, but which was seen as supportive as Saudi Arabia pledged not to flood the market with more fuel. The Organization of the Petroleum Exporting Countries (OPEC) failed to agree to a clear oil-output strategy on Thursday as Iran insisted on raising production to regain market share lost during years of sanctions, which were lifted in January. Analysts still took away positive aspects from the meeting in Vienna, as Saudi Arabia showed restraint. As a result, international Bent crude oil futures LCOc1 held around $50 per barrel early on Friday, trading at $49.99 per barrel at 0103 GMT, down 5 cents from the last settlement and almost double its January lows. Bank of America Merrill Lynch said that rising oil prices were also being "exacerbated by seasonal dynamics, as well as robust trend gasoline consumption growth in the U.S., India, and even China." Strong demand in Asia was also reflected by a jump in refining margins especially for diesel and jet fuel. Overall Asian refining margins have not been doing well this year, due to oversupply of products and the rising price of crude, but diesel and jet fuel production profits have jumped. For diesel, traders said a record heat-wave in south and southeast Asia had pushed up fuel demand to operate air conditioners, while jet fuel demand was soaring because of Asia's booming air travel.

 

[SolidTrustMarket]

Daily Market Outlook 7 June

Federal Reserve Chair Janet Yellen on Monday gave a largely upbeat assessment of the U.S. economic outlook and said interest rate hikes are coming but, in an omission that stood out to some investors, gave little sense of when. Overall, Yellen said, "I see good reasons to expect that the positive forces supporting employment growth and higher inflation will continue to outweigh the negative ones." While last month's jobs report, released Friday, was "disappointing," and bears watching, policymakers will respond "only to the extent that we determine or come to the view that the data is meaningful in terms of changing our view of the medium- and longer-term economic outlook." Though she stressed surprises could emerge that could change her expectations, and listed four main risks to the U.S. economy - slower demand and productivity, and inflation and overseas risks - she concluded by downplaying them all and flagging her expectation that "further gradual increases in the federal funds rate are likely to be appropriate." To some investors, the absence of a timeframe in Monday's remarks suggests the Fed will delay its next rate hike well beyond next week, when U.S. central bankers next gather to make monetary policy. Economists now see September or possibly July as the most likely time for a quarter-point policy tightening, while traders in futures markets are betting on later in the year. But to others, Yellen's repeated emphasis on the positive aspects of recent economic data continues to suggest a rate hike in the near future.

The U.S. central bank raised rates from near zero in December in the first U.S. policy tightening in nearly a decade. Prospects of another hike this month were all but killed by a report last week showing only 38,000 jobs were created in May, somewhat muting recent upbeat data on consumer spending, housing and overall U.S. growth. Although the jobs report was "concerning, let me emphasize that one should never attach too much significance to any single monthly report," Yellen said at the World Affairs Council of Philadelphia. "Other timely indicators from the labor market have been more positive." The dollar initially rose following Yellen's comments but later retraced, and financial markets did not give an appreciable signal on whether investors saw more or less chances of a rate hike in the near future. U.S. stock prices were up modestly from levels just before the speech.

Dashed expectations of a U.S. interest rate rise next week could force the Bank of Japan to use its dwindling policy ammunition sooner than it had wanted, as a resurgent yen further crimps the recovery in the country's exports and consumer prices. Much worse-than-expected U.S. jobs numbers last week all but erased the prospect of a June or July Federal Reserve rate hike, one of the few external factors Japanese policymakers had been counting on to weaken the yen against the dollar as they seek to reflate the economy out of stagnation. While the BOJ had been hoping to keep its policy powder dry in June and July, some analysts say diminishing expectations for a near-term Fed hike mean the BOJ could ease next month, if not earlier. The central bank held off on expanding stimulus at its last policy meeting in April despite cutting its price forecasts and pushing back the timing for hitting its 2 percent inflation target. BOJ Governor Haruhiko Kuroda, a former top Japanese currency diplomat, has repeatedly said he is ready to pull the trigger if a strong yen threatened the export-reliant economy. Since the central bank introduced negative rates in January, BOJ officials have said they are ready to deploy a combination of increased purchases of government bonds and risky assets, and a cut in interest rates deeper into negative territory. But with its massive buying drying up bond market liquidity and January's decision to deploy negative rates deeply unpopular with the public, BOJ officials are growing more receptive to the idea of boosting purchases of exchange-traded funds (ETF) invested in shares. Kuroda has said the bank's presence in the ETF market is "not too big," signalling that a large-scale increase in ETF buying could be a near-term option. The yen had pulled back from 18-month highs in early May on growing expectations of a summer Fed hike. But the weakest U.S employment growth in more than five years in May looks to have pushed back any rate rise and deflated the dollar. The tacit hope among Japanese policymakers had been for a near-term Fed rate hike to help stem yen gains, which have hurt exports and undermined one of the key transmission channels of the BOJ's stimulus. With Japan unable to win support from other major economies for currency intervention, the challenge for the BOJ will be to frame policy so that it keeps yen rises at bay without that appearing to be its main intention. The BOJ's meeting finishes on Thursday next week, the day after the Federal Open Market Committee (FOMC), so the board will be able to factor in the Fed's outlook and yen reaction.

 

[SolidTrustMarket]

Daily Market Outlook 8 June

Asian shares were flat on Wednesday; as weak Chinese export data offset a brightening energy sector outlook and an expected delay in interest rate hikes by the U.S. Federal Reserve. Chinese dollar-denominated exports declined 4.1 percent in May from a year earlier, compared with the expected drop of 3.6 percent. Imports fell 0.4 percent, less than the expected 6 percent. China's trade surplus is forecast to hit $50 billion in May. Investors further trimmed expectations of Fed rate hikes as they assessed Friday's employment report that showed new hires sharply dropped in May. Data published on Tuesday confirmed U.S. nonfarm productivity fell in the first quarter on a surge in labor-related costs, suggesting companies may have had to slow hiring after their hiring earlier this year outpaced revenue growth. In Europe, German bond yields hit a record low of 0.045 percent on Tuesday as investors sought a safe haven ahead of Britain's referendum on EU membership. The dollar also licked its wounds near four-week lows after the job data quashed expectations of a Fed rate hike in the next couple of months.

U.S. nonfarm productivity fell less sharply than initially thought in the first quarter and labor-related costs surged for a second straight quarter as companies hired more workers to raise output, suggesting profits could remain under pressure. The Labor Department said on Tuesday productivity, which measures hourly output per worker, contracted at an annualized rate of 0.6 percent, instead of the 1.0 percent pace the government reported last month. Productivity fell at a 1.7 percent rate in the fourth quarter. The revision for the first quarter, which reflected modestly higher output than previously estimated, was in line with economists' expectations. Output per worker in the first quarter was revised to show a 0.9 percent rate of increase, up from 0.4 percent. The government last month raised its first-quarter economic growth estimate to a 0.8 percent rate from the 0.5 percent pace reported in April.

The World Bank slashed its 2016 global growth forecast on Wednesday to 2.4 percent from the 2.9 percent estimated in January due to stubbornly low commodity prices, sluggish demand in advanced economies, weak trade and diminishing capital flows. Commodity-exporting emerging market countries have struggled to adapt to lower prices for oil, metals, and other commodities, accounting for half of the downward revision, the multilateral lender said in its latest Global Economic Prospects report. It expects these economies to grow at a meager 0.4 percent pace this year, a downward revision of 1.2 percentage points from the January outlook. In the United States, a steep decline in energy sector investment and weaker exports will also shave eight tenths of a percentage point from the World Bank’s 2016 forecast, bringing growth to 1.9 percent. The euro area saw a slight downgrade of its 2016 forecast to 1.6 percent, despite extraordinary monetary policy support and a boost from lower energy and commodity prices. Among major emerging market economies, the World Bank kept China’s growth forecast unchanged at 6.7 percent this year after 2015 growth of 6.9 percent. It expects China’s growth to slow further to 6.3 percent by 2018 as the world’s second-largest economy rebalances away from exports to a more consumer-driven growth model.

Oil prices stood steady near their highest level in about eight months on Wednesday, helped by industry data showing a larger-than-expected drawdown in U.S. crude inventories and by worries about attacks on Nigeria's oil industry. U.S. commercial crude inventories fell by 3.6 mn bbl last week, data from industry group API showed on Tuesday after the market settlement, compared with expectations for a 2.7 million barrel draw according to a revised Reuters poll. The U.S. EIA will issue official inventory numbers at 1430 GMT on Wednesday. Worries about global supply disruptions also supported the market, analysts said. The southern Delta swamps in Nigeria have been hit by militant attacks on oil and gas pipelines which have brought the African nation's oil output to a 20-year low. Nigeria's government said it would scale down a military campaign and talk to the militant group. Takayuki Nogami, senior economist at Japan Oil, Gas and Metals National Corp, said the start of summer gasoline season, supply disruptions in Nigeria and Canada and talk of a possible delay in the timing of U.S. rate hike have combined to push up the market. The EIA on Tuesday raised its 2016 U.S. oil demand growth forecast, saying demand will grow by 220K bpd from 140K bpd previously. But concerns about global demand weighed on prices. The World Bank slashed its 2016 global growth forecast on Wednesday to 2.4% from the 2.9% estimated in January due to stubbornly low commodity prices, sluggish demand in advanced economies, weak trade and diminishing capital flows. Japan's economy grew faster than initially estimated in the first quarter, data showed on Wednesday, as capital spending fell less than was first reported, but worries remain over slow consumer spending and weak exports.

 

[SolidTrustMarket]

Daily Market Outlook 9 June

The pace of hiring by U.S. employers slowed to near a two-year low in April, pushing up job openings in a potential sign that firms are having a hard time finding workers. The Labor Department said on Wednesday in its monthly Job Openings and Labor Turnover Survey, or JOLTS that the rate of hiring fell to 3.5 percent from 3.7 percent in March. That was the slowest rate since August 2014. Job openings, a measure of labor demand, increased 118,000 to a seasonally adjusted 5.79 million, the highest number since last July. The job openings rate rose to 3.9 percent. The U.S. economy was probably not as weak as has been reported in the first quarter, with data on Wednesday showing stronger consumer spending and investment in intellectual products than previously estimated. The Commerce Department's quarterly services survey, or QSS, showing consumption, including healthcare spending, increased at a faster clip than the government had assumed in its second estimate of gross domestic product published last month. According to JPMorgan, the QSS data suggested first-quarter consumer spending could be raised as much as two-tenths of a percentage point to a 2.1 percent annual rate when the government publishes its third GDP estimate on June 28. That, together with data last week on international trade and construction spending, suggest first-quarter gross domestic product could be raised to as high as a 1.2 percent rate from the 0.8 percent pace the government reported last month. The economy grew at a 1.4 percent rate in the fourth quarter.

Bank of Japan Deputy Governor Hiroshi Nakaso warned of lingering global economic uncertainty and signs of weakness in private consumption, signalling the central bank's readiness to expand monetary stimulus if needed to hit its inflation target. He also defended the BOJ's negative interest rate policy, saying that it will spur capital expenditure by pushing down corporate borrowing costs and offset demerits such as squeezing financial institutions' margins. The BOJ surprised markets in April by keeping policy steady despite once again pushing back the timing for hitting its 2 percent inflation target, opting to spend more time to assess the effects of negative rates on the economy and prices. While sticking to the view that Japan's economy will keep recovering moderately, Nakaso cited uncertainty over the global economy and financial market volatility. He also acknowledged weakness in private consumption and inflation expectations. The central bank's nine-member board is likely to weigh such risks at its policy review next week.

Crude prices held gains in Asia on Thursday as consumer prices fell more than expected in April, sparking demand hopes for the key market that this week released data that showed a drop in oil imports. In China, CPI data for May showed a drop of 0.5% month-on-month, more than the 0.2% fall seen, and 2.0% gain year-on-year, less than the 2.3% increases expected, while producer prices eased 2.8%, less than the 3.3% year-on-year drop expected. Crude futures pared some gains after surging to fresh 11-month highs on Wednesday, as a bullish U.S. inventory report eased some concerns related to the massive supply glut that persists throughout energy markets worldwide. On Wednesday morning, the U.S. Energy Information Administration (EIA) said U.S. commercial crude oil inventories decreased by 3.2 million barrels for the week ending on June 3, while attacks in Nigeria on oil infrastructure that crimped output this month offered support. At 532.5 million barrels, U.S. crude oil inventories are still at historically high levels for this time of year. On the West Coast, crude stockpiles rose by 2.4 million barrels to 60.9 million, reaching its highest level since 2009. It was partially offset by a 1.4 million barrel draw at the Cushing Oil Hub in Oklahoma. Although stockpiles at the main delivery point for NYMEX oil fell to 65.6 million barrels last week, supply levels still remain near full storage capacity. Analysts expected a draw of 2.8 million barrels, following a decline of 1.36 million a week earlier. On Tuesday evening, the American Petroleum Institute reported a drop of 3.6 million barrels last week. Meanwhile, crude production nationwide increased by 10,000 barrels per day to 8.745 million bpd, halting a four-month streak of weekly declines. Over the last year, crude output in the U.S. has plummeted by nearly 1 million bpd. Last year at this time, daily production hovered around 9.6 million barrels, its highest level in more than 40 years. Further gains in oil prices were limited by slowing economic activity in China, as oil imports fell in May to their lowest level in four-months. Earlier on Wednesday, China's General Administration of Customs reported that monthly crude imports fell to 32.24 million, amid rising congestion at a main port. China is one of the world's top importers of oil from the Middle East.

 

[SolidTrustMarket]

Daily Market Outlook 10 June

Asian shares pulled back on Friday as investors sought refuge in safe-haven assets amid festering concerns over the June 23 referendum that could see Britain exit the European Union. Wall Street shares also pulled back on Thursday after three days of gains, as a decline in the number of unemployment benefit claims last week showed the labour market remains strong despite May's unexpected drop in job growth. The number of Americans filing for unemployment benefits unexpectedly fell last week, pointing to sustained strength in the labor market despite a sharp slowdown in hiring last month. The rise in inventories came even as sales at wholesalers rose for a second straight month. Initial claims for state unemployment benefits declined 4,000 to a seasonally adjusted 264,000 for the week ended June 4, the Labor Department said. The drop confounded economists' expectations for an increase to 270,000. Claims have dropped by 30,000 since surging to 294,000 in early May. They have now been below 300,000, a threshold associated with a strong job market, for 66 straight weeks, the longest streak since 1973. The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 7,500 to 269,500 last week. The claims report offered the latest sign that the labor market remains strong even though the economy added only 38,000 jobs in May, the smallest gain since September 2010. A report on Wednesday showed job openings hitting a nine-month high in April and layoffs falling to their lowest level since September 2014. The claims report also showed the number of Americans still receiving benefits after an initial week of aid fell in the week ending May 28 to the lowest level since October 2000. The insured unemployment rate fell one-tenth of a percentage point to a record low of 1.5 percent. The health of the labor market will likely determine the timing of the next Federal Reserve interest rate increase. Fed Chair Janet Yellen this week reiterated the U.S. central bank's desire to raise rates, but gave no hints on when that might happen. Growth prospects for the second quarter received a further boost from a separate report from the Commerce Department on Thursday showing wholesale inventories increasing 0.6 percent in April, the biggest gain since June last year, after rising 0.2 percent in March. Sales at wholesalers jumped 1.0 percent in April, the largest increase since April 2015, after advancing 0.6 percent in March. With sales increasing solidly for a second straight month, it would take wholesalers 1.35 months to clear shelves, down from 1.36 months in March.

The dollar index was on track for a modest weekly gain on Friday, having bounced off this week's one-month lows as the euro took a heavy spill while sterling stayed under a cloud on jitters over the upcoming Brexit vote. A Reuters report on Commerzbank looking to put billions of euros in vaults rather than pay a penalty charge for parking them with the European Central Bank appeared to have unsettled an already nervous market. The U.S. Federal Reserve is scheduled to hold its two-day policy meeting through Wednesday, while the Bank of Japan concludes its own two-day policy meeting on Thursday. China's industrial production and retail sales data due on Monday could also set the tone for Asian trading next week. The pound has whipsawed in recent session in response to polls and other developments ahead of the UK's June 23 referendum on EU membership. BlackRock, the world's largest asset manager, said financial markets may be under-pricing the "Brexit" risk of Britain leaving the EU. With the euro zone and the UK in focus overnight, the dollar enjoyed a small reprieve. Dollar bulls had been hit hard since disappointing payrolls data a week ago convinced investors that the Fed will refrain from hiking interest rates as early as next week's policy review. A fresh batch of U.S. data on Thursday was more encouraging, with a surge in wholesale inventories in April prompting economists to lift their second-quarter economic growth estimates.

Oil prices fell on Friday, as a stronger dollar pulled crude off the 2016 highs hit this week, although strong refinery demand and global supply disruptions lent some support. Crude prices have virtually doubled since touching their lowest in more than a decade in early 2016 as strong demand and supply disruptions erode a glut that pulled down prices by as much as 70 percent from a mid-2014 peak. Market rebalancing is ongoing. On the demand side, global refining activity is about to hit its highest on record just as crude supply disruptions around the world tighten the market. Data in Thomson Reuters Eikon shows that currently available global refining capacity will reach 101.8 million bpd in August, its highest on record, and up from around 97.25 million bpd in March. Of the available capacity, investment bank Jefferies said on Friday that U.S. refinery utilization alone reached 90.9 percent in the first week of June. Traders said that this means that producers need to pump every barrel of crude they can to meet refinery demand, and that the supply disruptions around the world - from Canadian wildfires, sabotage in Nigeria, and output cuts in the United States, Venezuela and Asia - will tighten the market and eat into inventories. Yet the strong refinery output could end as fast as it came as the reserve capacity, the difference between available and installed capacity, is about to fall below half a million bpd, the tightest since late 2013, the data shows.