It’s been a difficult day for stock markets around the world with pretty much all major world indices in the red as traders take profits ahead of a series of potentially major developments over the next two days.
Upward momentum in US indices has been fading for a couple of weeks since the US buying climax on March 1st. Today, producer prices rose more than expected adding to the wage inflation seen in average hourly earnings last Friday. Rising prices adds to the pressure on the Fed not only to raise interest rates tomorrow but to continue raising rates through the year.
It remains to be seen if exhausted US indices will trend sideways for a couple of months like we saw in December and January or if they could stage a steeper correction like the big plunge in crude oil prices we have seen in the last week.
Today, WTI fell another 1.6% toward $47.50 at one point before bouncing back late in the day. Saudi Arabia’s production rose in February raising questions about its commitment to production cuts while Kuwait’s Oil minster suggested rising US share production could push oil back toward $45.00. Wednesday brings another DOE report which could intensify or weaken recent selling pressure. API inventories fell 0.5 mmbbls which has sparked some short covering. Oil could be active again Wednesday with DOE inventories due and the street expecting a 3 mmbbl increase. The street has gone really bearish toward oil in the last week so we could get a bullish surprise, time will tell.
Canadian stocks were hit hard today impacted not only by another oil driven selloff in energy stocks, but also a 10% nosedive in Valeant shares after long-time believer Bill Ackman caved in and dumped his shares in what looks like a textbook sign of capitulation.
Sterling fell then rebounded as the House of Commons shot down amendments from the House of Lords and passed the Brexit bill, enabling PM May to trigger Article 50 later this month. The focus turns to Europe and today's Netherlands election where a diplomatic incident with Turkey has given the euroskeptic Freedom Party a second wind heading into the vote. Both GBP and EUR could be active around all of this news.
Ahead of the Fed and election results, US retail sales and consumer price inflation could impact sentiment toward the USM In today's Asia Pacific trading we may see traders continue to react to yesterday's disappointing Chinese retail sales and prepare for tomorrow's Bank of Japan meeting.
There have been no major economic announcements after the US close today.
Significant announcements released overnight include:
US producer prices 2.2% vs street 1.9% vs previous 1.6%
US core PPI   1.5% as expected
Canada Teranet house prices 13.4% vs previous 13.0%
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)
10:30 am AEDT Australia Westpac consumer conf previous 99.6
3:30 pm AEDT Japan industrial production previous 3.2%
9:00 am GMT Italy retail sales street 0.8%
9:30 am GMT UK jobless claims change previous (42K)
9:30 am GMT UK 3M employment change street 87K vs previous 37K
9:30 am GMT UK ILO unemployment rate street 4.8%
9:30 am GMT UK average weekly earnings street 2.4% vs previous 2.6%
8:30 am EDT US consumer prices street 2.7% vs previous 2.5%
8:30 am EDT US core CPI   street 2.2%
8:30 am EDT US retail sales street 0.1% vs previous 0.4%
8:30 am EDT US retail ex auto street 0.1% vs previous 0.8%
8:30 am EST US Empire Manufacturing street 15.0 vs previous 18.7
10:30 am EST US DOE crude oil inventories street 3.0 mmbbls vs prev 8.9
10:30 am EST US DOE gasoline inventories street (2.0 mmbbls) vs prev (6.5)
10:30 am EST US DOE distillate inventories street (1.3 mmbbls) vs prev (2.6)
2:00 pm EST US FOMC interest rate decision 0.25% increase to 0.75%-1.00% exp
2:00 pm EST US FOMC projections and dot plot party line has been 3 hikes in 2017
2:30 pm EST FOMC Yellen press conference
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