MORNING ROLL CALL

May 16 • Morning Roll Call • 246 Views • No Comments

SPX and NASDAQ reach record highs as oil price surges on news of production cuts, GBP/USD revisits 1.30 handle.

In a relatively quiet day for scheduled economic calendar news between-the-lines1concerning North America, USA equity markets rallied, principally due to the oil price rising, as a result of longer term production cut commitments and agreements from (and between) Saudi Arabia and Russia. The main equity sectors to rise, causing the record high prices, were: financials, energy and materials. WTI oil rose by circa 2.2% on Monday to $48.7 per barrel, following its 3.5% rise last week. Gold extended its gains for a third day; up by approx. 0.23%, at $1230 per ounce.

The two newsworthy economic items released on Monday, revealed the dislocation which many analysts currently witness at the heart of the USA economy; the Empire Manufacturing index for May collapsed to -1, from a previous reading of 5.2, missing the expectation of 7.5 by some distance. The NAHB housing market index however, beat the forecast by two points, coming in at 60. In Canada existing home sales rose by 1.7% in April, rising from the 1.1% recorded in March. The DJIA closed up 0.41%, SPX up 0.48% and the NASDAQ up 0.46%

Earlier on Monday morning there was a raft of economic data released by China, the headline news was industrial production, which missed expectations by coming in at 6.5% YoY, falling from 7%. By accident or design, it was quite a convenient time to launch the massive global infrastructure programme announced by the Chinese government on Monday, referred to as “one belt, one road”. An ingenious way of bringing circa $1 trillion dollar worth of yuan debt into existence, whilst offering global partnerships with interested parties. Retail sales in China remained constant YoY. Australian home loans fell by -0.5% in March, however, investment lending improved to 0.8% growth, after the shock fall of -5.7% experienced in Feb.

In a virtually data free day for the Eurozone, European markets moved ahead on Monday, as did the euro, with all the major indices making gains. The equity sectors which advanced were of a similar profile to those in the USA. The STOXX 50 closed up 0.12%, UK’s FTSE up 0.26%, DAX up 0.29%, CAC up 0.22%.

GBP/USD rose through R3 in the morning session to threaten the 1.30 handle, to eventually give up most of its gains, ending the day just above R1, at circa 1.2895. Net short bets on sterling, revealed by the International Money Market accounts on the Chicago Mercantile Exchange on Friday, showed a change of 34,566 contracts versus the previous week; the third largest reduction in favour of the pound on record, since IMM records began in the mid 1990s. Net short positions have more than halved, from the record 107,117 number recorded at the end of March.

The euro made significant gains versus the majority of its peers on Monday, EUR/USD closing the day out at circa 1.0977. EUR/GBP ended the day at circa 0.8510, EUR/JPY ended the day at approx 124.73, the average gain the euro made versus its peers was circa 0.5% on the day. USD/JPY closed up circa 0.2%, at approx. 113.62.

Economic calendar news events scheduled for May 16th, all times quoted are London (GMT) time.

08:00, currency impacted EUR. Italian Gross Domestic Product s.a. and w.d.a. (YoY) (1Q P). The prediction is for Italian GDP to fall to 0.8%, from the 1.0% increase registered in the last Q of 2016.

08:30, currency impacted GBP. Consumer Price Index (YoY) (APR). The UK’s headline inflation figure is forecast to rise to 2.6%, from the 2.3% registered in March.

09:00, EUR German ZEW Survey (Economic Sentiment) (MAY). The expectation is for a rise to 22, from the 19.5 recorded in April.

09:00, currency impacted EUR. Euro-Zone Gross Domestic Product s.a. (YoY) (1Q P). GDP is expected to remain at 1.7% in the EZ.

12:30, currency impacted USD. Housing Starts (MoM) (APR). Housing starts are expected to have recovered to 3.7%, from the unexpected fall of -6.8%, registered in March.

13:15, currency impacted USD. Industrial Production (APR). Production is forecast to have fallen to 0.4%, from the 0.5% recorded in March.

13:15, currency impacted USD. Manufacturing (SIC) Production (APR). Manufacturing is predicted to have improved to 0.3% growth, from the -0.4% reading published in March.

 

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