Here are the latest developments in global markets:
- FOREX: The dollar index managed to erase part of yesterday’s losses during early European afternoon, inching up to 89.79 (+0.12%) despite the political chaos in the White House and renewed concerns over an escalation in US-China trade relations ahead of a crucial G20 meeting next week where leaders are expected to criticize unfair trade practices. In response to rhetorics that Trump was planning to impose further import tariffs on China, the latter held a milder tone, with the Chinese foreign minister expressing that both countries should manage to solve their differences. Dollar/yen retreated to 106.42 (-0.13%) as investors were looking for safer assets, while pound/dollar was steady at 1.3962, reversing earlier losses after the German Brexit Coordinator, Peter Ptassek, said that “a lot of progress being made” on Brexit withdrawal. A dovish speech by the ECB President, Mario Draghi, and disappointing industrial figures forced euro/dollar to fall back to 1.2375 (-0.13%) after reaching a one-week high of 1.2411. Speaking at a conference in Frankfurt, Draghi said that the central bank was more confident than in the past that inflation will reach the ECB’s target, but he reiterated that euro strength could weigh on price pressures. Moreover, regarding changes in monetary policy, he said that any adjustments will remain predictable. Aussie/dollar was the best performer, rallying to a three-week peak of 0.7901 (+0.55%), while kiwi/dollar rebounded to 0.7340 (+0.16%) ahead of New Zealand’s GDP growth prints.
- STOCKS: Despite renewed trade concerns which drove Asian equities lower, European stocks managed to rise moderately on the back of positive corporate news. The pan-European STOXX 600 and the blue-chip STOXX 50 were up by 0.23% and 0.26% respectively as of 1030 GMT, with consumer cyclicals, utilities, and energy leading the gains. The German DAX 30 increased by 0.23% after the German sports and apparel company Addidas raised its 2020 profitability targets and announced a share buyback of 3 billion euros. On the other hand, disappointing results from the Spanish fashion retailer Zara regarding its dividends offset IBEX 35’s gains. The French CAC 40 jumped by 0.36%, the UK’s FTSE 100 improved by 0.24%, while US stock futures were in the green as well.
- COMMODITIES: Oil prices headed higher after encouraging data on Chinese factory activities signaled potential demand increases. WTI crude and Brent were last seen at $61.09 (+0.66%) and $65.00 (+0.56%) per barrel. In precious metals, gold pared earlier gains, edging down to $1325.66 (-0.05%) per ounce.
Day ahead: US retail sales attract attention; New Zealand reports Q4 GDP growth
Looking forward to the rest of the day, the focus will remain in the US as disagreements within the White House continue to prevail, casting a dark light to Trump’s politics, while data releases out of the country will dominate the economic calendar.
Following yesterday’s CPI readings which showed an expected rise in US inflation, eyes will now turn to retail sales due at 1230 GMT, a reliable proxy for household spending. According to forecasts, retail sales are said to have rebounded by 0.3% in February in monthly terms after falling by an equivalent percentage in January. The core measure which excludes automobiles is also anticipated to have risen, reaching a growth of 0.4% m/m following a period of stagnation in the preceding month. If the actual numbers beat expectations, the dollar could see a bounce as this could signal that consumers feel more confident to spend on goods and services despite subdued wage growth.
Evidence on producer prices, another gauge of inflation, will come along with the above data, while stats on business inventories will be available at 1400 GMT. However, based on history those are less likely to cause significant moves to the dollar.
In other data, New Zealand will see the release of GDP growth figures at 2145 GMT, with analysts predicting the economy to have expanded by 3.1% year-on-year in the final quarter of 2017 compared to 2.7% in the third quarter. On a quarterly basis, growth is estimated at 0.7%, slightly above the previous mark of 0.6%. Although the Reserve Bank of New Zealand is said to stand pat on interest rates until inflation reaches 2.0%, comfortably above the middle of its range target of 1-3.0%, an upbeat report could increase positive sentiment on the economy given the uncertainty surrounding the political agenda of the new government.
Meanwhile, in the neighboring country Australia, the Reserve Bank of Australia will publish its quarterly bulletin at midnight, giving details on current economic conditions.
In energy markets, the Energy Information Administration will report on US oil inventories at 1430 GMT. Projections are for a smaller increase in US crude oil stockpiles in the week ending March 9.
In equity markets, trade considerations will likely remain at the forefront of attention, after a report from Politico yesterday suggested that the US is preparing steep new tariffs against China, which may be rolled out as early as next week. Any confirmation of this would likely revive concerns of a potential US-China trade war and thereby, trigger similar market reactions to what we saw last week. Namely, stock indices and trade-sensitive currencies like the Aussie and the Loonie could come under renewed pressure, while safe havens like the yen may gain.
Regarding today’s public speeches, the Executive Board member Benoit Coeure will be participating in a panel discussion in Berlin at 1615 GMT.