US crude rises on unexpected drop in inventories
Natural gas futures down 3 pct
US crude rose as an unexpected drop in US inventories and escalating tensions in Libya, but eased at the end of the week awaiting developments in the Ukraine crisis. On the New York Mercantile Exchange, crude oil settled at $99.99 a barrel, gaining $0.24. In London, Brent crude settled at $107.84, the contract fell by $0.75. NYMEX RBOB gasoline settled at $2.8960 a gallon, for the week, the contract fell by 0.05 cents. NYMX heating oil fell by $0.01 and settled at $2.9068. Energy / Precious Metals Close WTD % YTD % Oil — Light Crude 99.99 0.23% 1.60% Oil - Brent 107.89 -0.64% -2.63% Gold (USD/t oz.) 1,288.83 -0.85% 6.96% Silver (USD/t oz.) 19.10 -1.85% -1.60%
State-owned Qatar Petroleum (QP) said it would invest over QAR40bn ($11bn) to redevelop the Bul Hanine offshore oil field to prolong its life and increase its output. The field off Qatar’s east coast currently produces around 40,000 barrels per day (bpd) of crude oil, and QP hopes to more than double output to 90,000 bpd by 2020. Currency Close WTD % YTD % USD -EUR 1.3757 -0.81% 0.09% USD - GBR 1.6849 -0.09% 1.77% JPY — USD10 1.85 -0.32% -3.28%
Germany’s crude oil import bill in January through to March totaled EUR13.2bn ($18.3bn), an 8.3 decline over the same months a year earlier, data issued by the BAFA foreign trade office showed, reflecting lower prices and a drop in volume. Russia supplied 36.3 percent of the total in the three months, while 29.5 percent came from the British and Norwegian North Sea and 15.1 percent from OPEC members, BAFA said.
The Energy Information Administration (EIA) reported that crude oil inventories shed 1.8mn barrels in the week ending May 2 to 397.6mn barrels. Analysts polled by Reuters had expected a build of 1.4mn barrels. At Cushing, the delivery point for the West Texas Intermediate ( WTI) futures contract, stocks fell 1.4mn barrels to 24mn barrels. On the Gulf Coast they fell 1.9mn barrels to 213mn barrels. US crude imports fell almost 600,000 bpd and were at their lowest levels since September 2008 on the Gulf Coast at 2.95mn bpd. Refinery crude runs slipped a touch by 50,000 bpd hand-in-hand with a fall in refineries’ utilization rates of 0.8 percentage point to 90.2 percent of capacity. Gasoline stocks rose 1.6mn barrels, compared with analysts’ expectations for levels to be unchanged, while distillate stockpiles fell 447,000 barrels, versus expectations for a 900,000-barrel increase.
US natural gas futures fell and ended the week down 3 percent following the release of a third consecutive higherthan-expected gas storage report and moderating weather forecasts. Frontmonth natural gas futures on the New York Mercantile Exchange settled at $4.531 per million British thermal units, the lowest price since mid-April. Utilities added 74 billion cubic feet (bcf) of gas into storage last week, more than the 71 bcf forecast by analysts in a Reuters poll. Gas in storage now stands at 1.055 trillion cubic feet (tcf), still an 11-year low for this time of year. In early estimates, analysts forecast utilities will add 80 to 100 bcf of gas to storage this week, with an average of 91 bcf. That is short of the 98 bcf build during the same week last year but above the 82 bcf five-year average build.
The Euro fell to the lowest level in a month after ECB President Mario Draghi said policy makers would be “comfortable” with further easing in June. The Yen tary policy speculation. The external landscape threatens to unleash heavy headwinds however, with the spotlight on US economic news-flow and its implications for future actions by the Federal Reserve. A central theme driving currency markets since the beginning of the year has been the disconnect between increasingly soft US data outcomes and the Fed's commitment to continuing to "taper" its QE effort. That encouraged investors to suspect that the central bank may pause or abandon the process of reducing the size of its monthly asset purchases. Newly-minted Fed Chair Janet Yellen and company clearly had other thoughts however.
Needless to say, the tapering process headed for a weekly advance as a decline in US Treasury yields this year reduced demand for Dollars among Japanese investors. Canada’s Dollar dropped after a report showed an unexpected jobs decline last month. The British Pound declined the most against the Dollar in three months as investors bet a rally that pushed the UK currency to a four-year high this week boosted the appeal of US assets over those in Europe.
The US trade deficit narrowed in March as exports rebounded. The Commerce Department said the trade gap shrank 3.6 percent to $40.4bn, broadly in line with economists’ expectations. When adjusted for inflation, the deficit dipped to $49.4bn from $49.8bn in February. Exports increased 2.1 percent to $193.9bn in March, the highest level since November. Imports rose 1.1 percent to $234.3bn in March, the highest level in two years, in part reflecting a rise in the price of petroleum. Imports excluding petroleum increased 2.8 percent, a sign of rising domestic demand. Index Close WTD % YTD % US — DJ Average 16,583.34 0.43% 0.04% US — Nasdaq Comp.4,071.87 -1.26% -2.51% US — S&P500 1,878.48 -0.14% 1.63%
Growth in the US services sector accelerated in April, rising at the fastest pace in eight months as new orders jumped and overall activity quickened by the most since early 2008. The Institute for Supply Management (ISM) said its services sector index rose to 55.2 in April from 53.1 in March, topping expectations for a read of 54.1. The April read marked the 52nd straight month the index was above 50. Moreover, the April pace was the highest since August’s reading of 57.9, which had been a seven-year high.
The number of Americans filing new claims for unemployment benefits fell more than expected last week. Initial claims for state unemployment benefits declined 26,000 to a seasonally adjusted 319,000 for the week ended May 3, the Labor Department said. The decline snapped three straight weeks of increases that were driven by difficulties adjusting data during the Easter and Passover holidays and school spring breaks, which fall on different calendar days every year. Economists had forecast first-time applications for jobless benefits falling to 325,000 last week.
A big rise in US wholesale inventories in March is likely to temper an expected downward revision to the government’s estimate of first quarter economic growth, but fall short of keeping it from being pushed into negative territory. The Commerce Department said wholesale
US
has continued uninterrupted, with the rate-setting FOMC committee slashing the size of its purchases of bonds and MBS securities by $10 billion/month since the effort was launched in December. Policymakers including Yellen have argued that the slowdown in US economic performance in the first quarter was transitory and didn't warrant a change of course. Hard evidence supporting this position may be emerging at last: a Citigroup index tracking how US economic releases stack up relative to expectations found a bottom in early April and started to reverse upward. Indeed, the measure now sits at the highest in nearly three months. inventories increased 1.1 percent after an upwardly revised gain of 0.7 percent in February. Economists, who had expected wholesale stocks to rise 0.5 percent, said the increase in March was larger than the government had assumed in its advance gross domestic product estimate published last week.
Europe
Index Close WTD % YTD % England — FTSE1006,814.57 -0.12% 0.97% Germany - DAX 9,581.45 0.27% 0.31% France — CAC 40 4,477.28 0.43% 4.22%
Euro-zone businesses had a solid start to the second quarter of the year with activity picking up at its fastest pace in almost three years. While Germany continued to lead the upturn, businesses in Spain and Ireland grew at their fastest pace since before the financial crisis. Survey compiler Markit said the Composite PMI pointed to second-quarter growth of 0.5 percent, which would be the strongest in three years. The Composite PMI rose to 54.0 in April, as expected by economists, from March’s 53.1. It has held above the 50 mark that divides growth from contraction for 10 months in a row. The index for the euro zone’s vast service industry rose to a 34month high of 53.1 in April from 52.2 in March thanks to a surge in new business to its highest since June 2011 and a slight rise in employment.
Retail sales in the Euro-zone defied expectations of a fall and rose on the month in March driven by sales of food, drinks and tobacco. Retail sales, a proxy for household demand, rose 0.3 percent on the month in March after a downwardly revised 0.1 percent rise in February, beating market expectations of a 0.2 percent drop, data from the EU’s statistics office Eurostat showed. The monthly rise in retail sales in March was driven by a 1.3 percent jump in the sales of food, drinks and tobacco, showing the best performance since June 2011, according to Eurostat.
The European Central Bank (ECB) left its main interest rate unchanged at a record low of 0.25 percent, holding off fresh policy action while it waits to see whether a tick up in inflation last month gains traction. The decision to leave rates unchanged was expected, as ECB policymakers await updated economic forecasts from the bank’s staff in June to assess whether to act to counter low inflation that risks becoming stuck in a “danger zone” below 1 percent.
Activity in Germany’s private sector grew for the 12th straight month in April as new orders flowed in. Markit’s final composite (PMI) stood at 56.1 in April, well above the 50 mark. That was mar-
With that in mind, traders will be keen to monitor the release of April's US retail sales and inflation data. The CPI print is particularly notable, with the benchmark year-on-year price growth rate expected to jump to a ninemonth high of 2 percent. Consumer confidence is likewise seen improving: median forecasts suggest a University of Michigan sentiment gauge jumped to the highest level since July 2013 this month. If the recently improving trend in relative outcomes continues to hold, traders may be treated to upside surprises topping even such formidable results. Such a turn of events may prove potent in helping to scatter doubts about the Fed's ability to con- ginally weaker than the April flash estimate of 56.3 and compared with March’s final reading of 54.3. A sub-index measuring activity in the services sector jumped to 54.7 in April, up from a fivemonth low of 53.0 in March, with broadbased growth across all monitored service industries.
German exports posted their biggest fall in nearly a year in March and imports also dipped as the crisis in Ukraine and a slowdown in China weighed, narrowing the trade surplus and confirming trade was a drag on growth at the start of 2014. Figures from the Federal Statistics Office showed seasonally-adjusted exports slipped 1.8 percent on the month, their second consecutive fall, and imports dipped 0.9 percent, pushing the trade surplus down to EUR14.8bn. The consensus forecast in a Reuters poll of economists had been for shipments abroad to rise by 1 percent and for imports to increase by 0.5 percent.
The Bank of England (BoE) kept interest rates at a record low but the strong pace of Britain’s economic recovery and a surge in house prices is likely to lead to a split among policymakers soon. As expected, the Bank’s Monetary Policy Committee (MPC) left its benchmark interest rate at 0.5 percent where it has sat since the depths of the financial crisis more than five years ago.
Expansion in China’s services industry slowed slightly in April, with employment growth slipping to a seven-month low. The Markit/HSBC services Purchasing Managers’ Index (PMI) stood at 51.4 in April from March’s 51.9. The survey found that input prices index eased to their weakest in 10 months, and while the new and outstanding business sub-indexes remained stable, the sub-index of business expectations fell to a seven-month low. Meanwhile, Markit/HSBC’s manufacturing sector PMI showed that activity contracted for a fourth consecutive month in April, with the index at 48.1. However the official manufacturing PMI rose to 50.4 from March’s 50.3, indicating a slight expansion. Index Honk Kong — Hang Seng Korea - KOSPI India - BSE Pakistan - KSE Brazil - BVSP Mexico - INMX China — SSE180 Russia - IRTS
Japan
Bank of Japan board members agreed that consumer spending remains buoyant following an increase in the sales tax rate in April, due to a tight labor market and improving wages, minutes of the central bank’s April 7-8 meeting. At the April 78 meeting, the BOJ board voted unanimously to maintain its pledge of increasing base money, or cash and deposits at the central bank, at an annual pace of JPY60tn to JPY70tn ($590-690bn) via purchases of government debt and risk assets. Index Close WTD % YTD % Japan — Nikkei 22514,199.59 -1.78%- 12.84% Japan - Topix 1,165.51 -1.44% -10.50%
Emerging Markets
China
Close WTD % YTD % 21,862.99 -1.79% -6.19% 1,956.55 -0.15% -2.72% 22,994.23 2.63% 8.61% 28,494.54 -1.48% 12.80% 53,100.34 0.23% 3.09% 41,641.11 1.64% -2.54% 4,680.36 -0.98% -7.14% 1,232.78 7.30% -14.55%
India
Activity in India’s services industry contracted for a tenth straight month in April, pushing firms to put hiring plans on hold for the first time since November. The HSBC Services Purchasing Managers’ Index, compiled by Markit, rose to 48.5 in April from 47.5 in March, but held stubbornly below the 50-mark. New business fell at a slower pace in April but the employment sub-index slipped just below the 50-level to 49.8 as firms reacted to falling workloads. tinue with its policy normalization effort.
Unencumbered speculation about the end of QE and the eventual commencement of interest rate hikes thereafter sparked broad-based liquidation across the spectrum of risky assets last year. A repeat of this process now may weigh heavily on the Aussie. As one of the higher-yielding G10 currencies, the unit is highly sensitive to broad-based risk aversion. That means another mass exodus from sentiment-geared assets stands to punish AUD.