Energy commodities including crude oil, gasoline and natural gas have been on the rebound this morning along with copper. While a decline in API inventories and better than expected economic data from Japan and China appear to be getting the credit for the moderate moves, to me this appears to be a normal trading bounce to ease short term oversold conditions.

Crude oil may be active through the morning with traders looking to the DOE reports for confirmation of the API decline. Even if US inventories continue to decline, the supply war between Saudi Arabia and other countries including Iran, Russia and the US continues full force, so a rebound may only be able to carry crude so far. For now, CAD and NOK have been bouncing back along with energy prices.

China may become a bigger story again to start next week’s trading with key industrial production and retail sales reports due over the weekend. Interestingly, CNH is one of the few currencies underperforming USD today which suggests concern its economic struggles continue and could potentially deepen.

The two worst performers among majors overnight have been NZD and AUD. The Kiwi Dollar has been falling back ahead of today’s RBNZ interest rate decision which comes out during North American trading hours potentially providing an opportunity for action.

I’ve mentioned before that the Fed appears to have signalled last call to the other central banks to get in any last stimulus moves before the FOMC starts to raise rates and send the pendulum back the other way. Traders are expecting the RBNZ to become one of the few central banks to take this opportunity. In 2014, the RBNZ raised interest rates by 0.25% four times and so far in 2015, it has given back three of them. Today the central bank is expected to cut again, and the falling Kiwi Dollar appears to be reflecting this prospect.

If the RBNZ were to decide to keep its benchmark rate on hold again, that would be a hawkish surprise that could boost NZD. Dovish potential surprises that could send NZD lower include a larger than 0.25% rate cut or more aggressive talk against the dollar or intervention threats.

Stock markets have been trading flat to slightly lower overall today in North America and Europe but we could see activity in specific sectors. Rumours of merger talks between DuPont and Dow Chemical could put chemical producers in play while energy producers could rebound along with commodity prices and the copper bounce could help metal miners.

Retailers could come under pressure again after Costco and Lululemon continued the trend of weak results. A strong report from Dollarama confirms the trend seen though the latest earnings season of consumers shifting their spending from the high end to the low end. This is usually seen in recessions, and in this case reflects a sector/regional recession on both sides of the border from the loss of so many high paying oilpatch jobs over the last year.


Corporate News

Lululemon        $0.38 down 12% over year, sales $480M up 14% over year

Dollarama        $0.78 vs street $0.71, same store sales 6.4% vs street 6.1%.

Costco            $1.09 vs street $1.17

MasterCard        18.8% dividend increase


Economic News

Significant announcements released overnight include:

US API crude oil inventories         (1.9 mmbbls) vs street 0.6 mmbbls

Australia consumer confidence        previous 101.7

Japan machine orders            street 0.6%
Japan core machine orders        10.7% vs street (1.5%)

China consumer prices            1.5% vs street 1.4%
China producer prices            (5.9%) vs street (6.0%)

Germany trade balance            €20.8B vs street €21.7B

Upcoming significant announcements include:

10:30 am EST        US DOE crude oil inventories        street 1.3 mmbbls
10:30 am EST        US DOE gasoline inventories        street 2.0 mmbbls

3:00 pm EST Wed    NZ RBNZ interest rate            0.25% cut to 2.50% expected
9:00 am NZDT Thu


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