13
Mar
13
Mar

US Durable Goods Orders, No-Deal Brexit Vote, EIA Data

The US dollar continued to fall from its recent high. From emerging markets especially the Indian rupee (INR) further stabilized against the greenback as inflow from foreign investment increased to $3.1 bn. worth of Indian equities.

Gold prices moved higher with the weaker dollar, pushing now clearly above the $1,300 threshold. Some analysts mentioned that the ongoing uncertainties surrounding a deal or no-deal Brexit could have also drive demand in perceived safe-haven investments like gold is sometimes called.

Oil prices further stabilized higher over news indicating that OPEC and especially Saudi Arabia are committed to production cuts and production levels in Venezuela shrinking due to the current political situation in the South-American country.

Major stock indices around the world traded mixed on Tuesday. European indices, especially those from the United Kingdom opened clearly lower on Wednesday morning, after the UK Parliament voted for the second time against the Brexit deal Prime Minister Theresa May proposed. However the Volatility Index VIX, based on the volatility of S&P 500 options reached a new 5-months low on Tuesday and was only slightly up by Wednesday morning.

On Wednesday the Italian unemployment rate and the European level of industrial production will be disclosed. From the US data on e-commerce retail sales, construction spending and new orders for durable goods will be made available. Later China is set to publish data on retail sales, unemployment and industrial production.

EUR/USD

The Euro extended its recovery while still below the level from Thursday last week when the currency plunged following comments from the European Central Bank (ECB) that it would launch a program to stimulate bank lending and also to keep the current zero interest rates until the end of the year. However recently it was reported, that the program might stimulate bank loans might be in a less generous package than anticipated, given the current strength of the economy.

On Wednesday the Italian unemployment rate and the European level of industrial production will be disclosed. From the US data on e-commerce retail sales, construction spending and new orders for durable goods will be made available.

The EUR/USD chart

GBP/USD

While the pound was subject to quite some volatility on Tuesday as the UK Parliament again voted against the Brexit deal proposed by the PM Theresa May. However markets did not take this with a totally negative sentiment, given that Parliament now will vote on whether a “no-deal” Brexit should take place and if not the departure from the European Union delayed even aver the current March 29 deadline, with an overall expectation that no “no-deal” Brexit would take place.

In terms of economic data the manufacturing sector improved in January with manufacturing output up by 0.8% m/m (expected +0.2%) and industrial production up by 0.6% m/m (expected +0.2%). However the trade balance deficit increased from GBP 12.1 bn. to GBP 13.1 bn.

On Wednesday the RICS House Price Balance will be released. The index was for the past five months negative indicating a fall in house prices.

The GBP/USD chart

WTI Oil

Oil prices pushed again higher on Tuesday. Multiple factors were attributed to the continued move higher, such as commitment by the Saudi Arabians to continue with the planned production cuts and reduce exports next month to below 7 million barrels per day and overall below 10 million barrels per day. This comes despite pressure from the US, especially US President Trump who took a stance against the OPEC cuts. OPEC’s secretary general in turn called Trump’s tweets in turn as another “addition to the list of uncertainties”.

Other factors affecting the markets were the disruptions in Venezuela and numbers from the American Petroleum Institute (API) indicating that crude oil inventories dropped by 2.6 million barrels over the course of the previous week in the United States.

On Wednesday the Energy Information Administration (EIA) will publish its weekly numbers on crude oil, gasoline and distillate stockpiles in the United States.

The WTI Oil chart

US 500

US stock indices traded mixed with relatively little movement on Tuesday compared to the significant volatility seen on Monday. Among the major indices the Dow Jones Industrial Average (US 30), was especially affected by the negative performance of Boeing (-6.12%), which continues to suffer following the complete loss of a second 737 Max aircraft within less than a year and many countries around the world closing their airspace for the new single-aisle airliner.

The adverse performance of Boeing was also felt in the overall performance of industrial stocks (US Industrial ETF -0.91%), while some other sectors like health care (US Health Care ETF +0.68%) or Biotech (US Biotech ETF +0.77%) were trading overall higher.

Shares of the electric car maker Tesla (-2.50%) retraced after the recent recovery with the company announcing that it would increase its prices on average by 3 percent worldwide, while excluding the base Model 3 at $35,000 from this move. Analysts from Morgan Stanley cautioned that the recent price cut for Model 3 could indicate issues in demand from this market segment the company is facing.

While most major companies already published their quarterly financial results, this and next week still some companies will publish their numbers. Among others on Thursday Adobe, DocuSign, Pivotal and Broadcom will publish their numbers. Next week results from companies like Micron and Tilray are expected.

The US 500 chart

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