Daily Market Digest: UK Industrial Output Rises and Oil Volatility

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UK’s industrial and manufacturing output posted modest gains in March, but still remains low on a year over year basis. Oil prices remain volatile ahead of the weekly crude oil inventories report.

Today’s Economic events

  • RBNZ releases semi-annual Financial Stability Report
  • Australia Westpac consumer sentiment 8.50% vs. -4.0% previously
  • Australia home loans m/m -0.90% vs. -1.40%
  • Japan leading indicators 98.40% vs. 96.40%
  • UK Manufacturing Production m/m 0.10% vs. 0.40%
  • UK Industrial production m/m 0.30% vs. 0.70%

Coming up

  • NIESR UK GDP Estimate (Q1)
  • Crude Oil inventories (Est. 0.1 Mn)
  • New Zealand business manufacturing index

Kiwi extends gains on RBNZ’s Financial Stability Report

The Reserve Bank of New Zealand yesterday released its semi-annual Financial Stability Report. Lack of reference to monetary policy or outlook saw the Kiwi tick higher on the release. The central bank focused on the New Zealand’s housing markets and laid out plans to curb the increase in housing prices. Traditionally, lower interest rates are supportive of the housing markets as cheaper mortgage makes it easier for the consumer to purchase homes. However, as seen in Australia just over a year ago, most of the gains in the housing markets came with an increase from foreign buyers. The RBNZ noted that it was making plans to stem the housing market prices, a move is seen by the RBA when the central bank, along with housing regulators managed to clamp down on investors driving up prices in the housing sector.

The RBNZ left interest rates unchanged last month after cutting by 25bps the month before, bringing the interest rate to 2.25%. The central bank, however, noted that further easing might be necessary as it expects New Zealand’s inflation to undershoot its 1% – 3% inflation target rate. New Zealand’s quarterly inflation was at 0.40% in the first quarter this year, on a year over year basis, while inflation ticked higher by 0.20% between the fourth quarter of 2015 and the first quarter of 2016.

UK’s Industrial output rises in March, but still low

Industrial and manufacturing output in the UK posted a modest rebound in the month of March after falling February. Data released by the UK’s Office for National Statistics today showed that industrial production increased 0.30% on a month on month basis in March, reversing the losses of 0.20% decline in February. Manufacturing output also rose 0.10% after falling 0.90% in February. Both industrial and manufacturing production missed analyst estimates. On a yearly basis, industrial output contracted 0.20% in March, while manufacturing output contracted 1.90% in March, compared to a 1.60% drop a month ago.

The data comes ahead of tomorrow’s BoE inflation report and monetary policy meeting where the interest rate is expected to stay unchanged, but the BoE could take a dovish stand as economic data continues to show stalling momentum into the second quarter, following a 0.40% GDP increase in the first quarter. The British pound was largely muted to the data.

Oil prices choppy ahead of inventory report

Crude oil prices continue to baffle investors as prices turned bullish yesterday, closing at $44.52 a barrel after dropping to a low of $43.23 on Tuesday. WTI Crude oil is currently trading at $4.84 a barrel ahead of the weekly Crude oil inventory report where analysts expect to see a soft build-up of only 0.1 million barrels, compared to the 2.8 million barrel build-up a week ago. Oil remained volatile amid the raging wildfires from Canada and production disruptions from Libya. Yesterday, data from the American Petroleum Institute (API) showed that US crude oil inventories rose by 3.45 million barrels to reach a record high of 543.1 million barrels during the reported week ending May 6th, beating forecasts of 714k barrels.

Oil trader and managing partner at Tyche Capital Advisors in New York said: “We should roll back a good part of today’s gains if the EIA confirms the builds cited by API or comes up with even larger numbers.

Dollar slump over – Goldman Sachs

Goldman Sachs says that the dollar slump is over as the bank expects to see the US dollar advance by as much as 15% in the next two years. The bank said that traders have misjudged the Fed’s intentions on rate hikes for the rest of this year. Simultaneously, the bank also raised in dovish forecasts on gold, noting that gold could see $1200 in 3 months, $1180 in six months and $1150 in 12-months.

We remain dollar bullish and think the trajectory is higher from here,” Robin Brooks, New York-based chief currency strategies told Bloomberg in a radio interview.


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