Crude Oil climbs as stimulus boosts demand expectations, SEK retreats on deflation fears
The implications of weekend developments in China combined with Thursday’s ECB stimulus decision, and Friday’s Goldilocks (not too hot, not too cold) US employment report continue to work through markets to start the week.
On the weekend, China’s trade surplus and Japan’s GDP beat expectations, indicating that their economies are starting to improve. This indicates that other economies besides the US and UK are getting up off their knees. Adding to this new stimulus for Europe and another round of targeted stimulus in China (focusing on farmers and agriculture this time on top of rural areas and small businesses recently), the outlook for the global economy and resource demand continues to improve.
This has helped to give crude oil and gasoline prices a boost today along with gold, although surprisingly, China-sensitive copper has not taken part in this rally. It also has helped to spark renewed interest in resource dollars with AUD, CAD and NZD rising to the top of the pack, positive housing starts also helping to shore up the loonie.
On the other hand, European continental currencies remain soft on anticipation of more stimulus to come which could depress the value of currencies. EUR and the pegged DKK and CHF continue to fall from Thursday’s ECB announcements. SEK has joined the decline, falling on anticipation of interest rate cuts in Sweden after Riksbank Deputy Governor Ekholm indicated Friday that the country faces serious deflation risks and a housing price survey fell back today.
US indices are consolidating Friday’s gains as is to be expected following last week’s big moves and limited economic news today.
Economic reports released overnight and this morning include:
The PBOC announced cuts to bank reserve requirements in rural areas (200 bps for rural commercial banks and 50 bps for rural co-operative banks) in a bid to boost lending to farmers and the agricultural sector.
China trade balance $35.9B vs street $22.6B
China exports 7.0% vs street 6.7%
China imports (1.6%) vs street 6.0%
Japan GDP annualized 6.7% vs street 5.6% and previous 5.9%
Sweden SEB house prices 56 vs previous 60
Canada housing starts 198K vs street 185K
Economic reports due later today include:
There are no major economic announcements today but there are a number of speeches of note,
including RBA Governor Stevens, FOMC members Bullard, Tarulle and Rosengren, and IMF President Lagarde; plus Australia PM Abbot visits Canada