It’s been a while since crude oil was the big story of the day but it stole the spotlight away from a very strong US ADP payrolls report. Through the winter, oil has been holding steady between $50 and $55 with traders trying to figure out if higher prices would boost US shale production enough to offset falling OPEC production. US inventories had been rising through the winter but this had been discounted as due to short term factors. Last week it seemed that the big build phase was ending. 

Today, however, a big way above expectations 8.2 mmbbl increase in US DOE inventories indicated that oversupply isn’t going away. This caused many traders to throw in the towel sending WTI down 5.3% and Brent down 4.8%. Gasoline inventories, on the other hand, declined more than expected cushioning the blow as gasoline retreated only 1.8%. 

The selloff in energy prices dragged energy stocks down the drain too, which in turn pulled the Sow, S&P and S&P/TSX lower on the day. It comes as no surprise then that the oil heavy Canadian market fell 0.7% while the oil light/technology heavy NASDAQ finished in the green.

Falling energy and metal prices also had a negative impact on resource currencies sending CAD, NOK, AUD and NZD sharply lower with the potential that Australian stocks could be impacted when they open for trading today. 

The USD gained ground as a very strong ADP payrolls report added to the case for a March US interest rate increase. Fed funds are currently pricing in a 100% chance of an increase in March, a 50% chance of a second increase in June and a 25% chance of a third increase in September. Friday brings the nonfarm payrolls and wage inflation reports. 

Today, China may attract attention with inflation numbers due and perhaps more fallout from yesterday’s trade report which saw a surprise deficit on a big increase in imports. Tomorrow the ECB is meeting. No changes are expected with a one and done taper to QE expected to kick off in April. The ECB seems to want to stay the course until the elections due in the Netherlands, France, Germany and Italy over the next year are done. It will be interesting to see if rising inflation or external events force them to change their plans. EUR pairs could be active around the decision and the Draghi press conference. 

 


Corporate News

There have been no major economic announcements after the US close today. 


Economic News

Significant announcements released overnight include:

US ADP payrolls        298K vs street 189K 
US ADP payrolls        previous revised up to 261K from 246K

Canada housing starts        210K vs street 200K

US DOE crude oil inventories    8.2 mmbbls vs street 1.3 mmbbls
US DOE gasoline inventories    (6.5 mmbbls) vs street (2.0 mmbbls)

Germany industrial production    0.0% vs street (0.6%)


Upcoming significant economic announcements include:

(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)  

12:30 pm AEDT        China consumer prices        street 1.7%
12:30 pm AEDT        China producer prices        street 7.7%

10:00 am GMT        Greece unemployment rate    previous 23.0%

12:45 pm GMT        ECB decision            no change to interest rates or QE expected
1:30 pm GMT        ECB Draghi press conference

8:30 am EST        Canada new house prices    previous 3.0%

8:30 am EST        US jobless claims        street 238K

10:30 am EST        US natural gas            street (63 BCF) vs previous 7 BCF

 


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