Riskier Assets Remain Volatile; Crude Rebounds on Inventory Report

Riskier Assets Remain Volatile; Crude Rebounds on Inventory Report

09 Aug 2019

Riskier assets continued experience volatility as trade issues dominated the trading landscape. China reported higher than expected food inflation, while US wholesale price inflation remained tame. Crude oil prices surged higher following a smaller than expected build in crude oil inventories.

Chinese Food Inflation Surged

China reported Stronger than expected CPI.  CPI was higher than expected at 2.8% year over year while PPI was a couple of ticks lower than expected at -0.3% year over year.  Excluding food and energy CPI rose nearly 9% driven by a surge in Chinese food prices.

Crude oil prices surged during the latter part of the week. This followed a smaller than expected build in crude oil inventories. According to the EIA, US commercial crude oil inventories increased by 2.4 million barrels from the previous week. At 438.9 million barrels, crude oil inventories are about 2% above the five year average for this time of year. Total motor gasoline inventories increased by 4.4 million barrels last week and are about 4% above the five year average for this time of year. Total commercial petroleum inventories increased last week by 10.4 million barrels last week

US PPI was in Line with Expectations

The Labor Department reported on Friday that producer prices increased by 0.2% last month after nudging up 0.1% in June. On a year over year basis, July the PPI increased 1.7% after advancing by the same margin in June. Expectations has been for PPI to rise 0.2% in July and increase 1.7% on a year-on-year basis. Excluding the volatile food, energy producer prices edged down 0.1% last month. That was the first decline since October 2015 and followed an unchanged reading in June. Core PPI increased 1.7% in the 12 months through July after rising 2.1% in June.

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