The indexes posted the biggest weekly declines of the year, as investors fearing slowing world economy. Treasury yield dipped with the yield on the 10-year bond ending at 2.630% from 2.723% a week ago. Volatility advanced, with the VIX ending at 16.05 from 13.57 the week ago.
US trade deficit surges to 10-year high despite President Donald Trump’s efforts to reduce the number. The U.S. trade deficit ballooned in December to a 10-year high of $59.8 billion due to 2.1 percent increase in imports to $264.9 billion while exports fell 1.9 percent to $205.1 billion. Slowing global growth and a stronger dollar is also working against the trade balance. The trade deficit with China in December was by far the most of any nation. Where most investors expect the two countries to strike a trade deal later this month, there are also speculations that a deal may not be the sure thing.
Mixed U.S. economic data. Retail sales excluding autos slumped 1.8% in December 2018, the biggest drop since January 2000 and industrial production led to a 3.8% increase. Initial jobless claims fell to 223,000, against the market expectation of 225,000. Whereas job growth for February 2019 added just 20,000 payrolls, shockingly 160,000 fewer than the economic forecast. Housing starts rose 18.6% with single-family accounting for strongest tally and permits also increased 1.4% compared to December 2018.
Powell dismisses higher inflation rate and sticks to 2 percent inflation. Fed’s preferred inflation gauge has remained stubbornly below the central bank’s 2 percent goal for most of the economic recovery that began in mid-2009. Where Powell emphasizes on making 2 percent inflation target credible for both good times and bad times, on the other hand, Eric Rosengren, president of the Federal Reserve Bank of Boston says that Fed may need time to have clarity on US economy.
Eurozone annual inflation confirmed at 2 percent in August. Eurozone consumer prices accelerated to 1.5% in March, down from 2.2% in October driven by energy costs, services and food, alcohol and tobacco prices. Core inflation, which excludes energy and food prices, edged lower to 1 percent in February from 1.1 percent in last month. The lowest annual inflation rates were recorded in Croatia, Montenegro and Greece, whereas the highest annual rates were recorded in Turkey and Ukraine.
May’s Brexit vote is ‘on a knife-edge’. Prime Minister Theresa May is facing a crunch series of votes determining the course of Brexit and the U.K.’s relationship with the EU. May’s deal initially failed to win enough approval in Parliament in January because of widespread opposition to a key part of the deal known as the “Irish backstop”.
ECB pushes back rate hike plans. The bank kept interest rates on marginal lending facility and deposit facility unchanged at 0, 0.25 and -0.40 percent, however, updated guidance for a rate hike. These have been at record lows for years following the euro sovereign debt crisis of 2011 in an effort to boost inflation and stimulate growth.
China’s exports fell by more than 20% in February. China reported worse than expected trade data for the month of February. Dollar-denominated exports plunged 20.7 percent from a year ago, missing economists’ expectations of a 4.8 percent decline. And dollar-denominated imports fell 5.2 percent, missing an expected 1.4 percent fall.
The week ahead. China and U.S. to hold further discussions in Beijing after the National People’s Congress concludes on March 15. On Tuesday next week, lawmakers to vote for a second time on May’s Brexit deal after initially rejecting it in January.
Gold prices bounced 0.05% for the week on weak February employment data. The 10 year U.S. bond yield continues to weaken and the dollar is showing signs of reversing its recent uptrend. Copper slipped 1.35% along with other base metals after the European Central Bank delayed interest rate rises to 2020 and promised cheap loans, pushing the euro lower and the dollar higher, and making metals more expensive for other currencies. U.S. Wheat futures took another hit this week on technical selling, reduced export demand for U.S. supplies, and increased prospects for competitor harvests later in the year. Looking at the two headline indices, Bloomberg Commodity Total Return fell 0.62%, whereas S&P GSCI Total Return rose 0.12%.
Crude Oil (Weekly Outlook: Slightly Bullish): U.S. crude futures fell 0.48% to about $56 per barrel, after data showed a slump in Chinese imports and exports last month and the European Central Bank slashed its outlook for economic growth on the continent. Chinese crude oil imports surged 21.6 percent to 10.23 million barrels per day, the third-highest volume on record. OPEC and its allies including Russia are trying to remove 1.2 million bpd from the market during the first six months of the year, following a collapse in crude prices in the final months of 2018. Number of oil rigs operating in U.S. fields fell for a third straight week, at a current level of 834.00, down from 843.00 last week and up from 800.00 one year ago.
Natural Gas (Weekly Outlook: Neutral): The natural gas market settled slightly higher during the week, reaching to the $2.87 level. Energy Information Administration’s weekly storage report failed to make much of an impact price-wise, with a larger-than-average 149 Bcf withdrawal from stocks that came close to market expectations. The 149 Bcf pull for the week ended March 1 compares with a 60 Bcf withdrawal for the year-ago period and a five-year average pull of 109 Bcf.