Disappointing US employment data tamed speculations of Fed funds rate hike, sending US dollar and Wall Street lower. Commodities gained support, however, as the greenback declined. The front-month contract for WTI crude oil rose to a 3-day high of 50.45 before ending the day at 50.09, up +5.23%. The Brent crude contract also jumped to a 3-day high of 57.69 before settling to 57.1, up +3.61%.
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Weak US Data Reignited Concerns over Growth Momentum
Crude oil prices changed little. While supported by a weaker US dollar, gains were offset by disappointing US’ trade data. Trade deficits narrowed to US$ 40.4B in April from US$ 42.3B a month ago. Exports of goods soared +2.8% after falling -1.4% previously, while imports of goods rose +1.8% after dropping -0.5% previously.
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Disappointing US Trade Balance Might Drag First Quarter GDP
Crude oil prices declined with Brent crude plummeting after reports that Libyan exports are expected to rebound. WTI crude initially weakened amid forecasts that US inventory would increase further. The contract then recovered after encouraging US data and gains in Wall Street. The front-month contract for Brent crude oil slumped to a 2-week low 107.86 before ending the day at 108.12, down -1.33%.
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Brent Crude Slumped as Libya Ready to Resume Production
The price of Brent oil futures remains flat near $109 a barrel on Thursday afternoon as traders assess the prospects for oil demand after the US and Europe emerge from winter which has seen the spread in US WTI crude oil prices narrow to back under $7 to Europe’s ICE Brent.
Latest Brent Oil Price
In London, Brent crude oil futures for April 2014 delivery was trading at $108.87 a barrel, 15:12 GMT this afternoon on the ICE Futures Exchange, or 0.6 percent lower on the day. Meanwhile, US WTI oil stood at $102.11 a barrel, or $6.76 a barrel under the Brent price.
US API Weekly Oil Data
US crude inventories fell by 1.1 million barrels last week, data from industry group the US API (American Petroleum Institute) showed, even though overall domestic stockpiles rose by 822,000 barrels.
“I think the story really is the divergence between (US) WTI prices and Brent prices because of the API figures.” said Christopher Bellew, oil futures broker at Jefferies Bache.
“There’s a little bit of weakness in Brent, possibly because there’s no fresh bad news on the geopolitical front. However we’re still holding above $109 and it could work its way back up to $110.” Bellew said.
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Brent oil price flat near $109 whilst spread to US crude narrows
Crude oil prices weakened as disappointing Chinese PMI overshadowed positive US data and the moderately bullish inventory report. Gold was also softer as the US dollar and Wall Street strengthened. Expectations that the Fed would continue its schedule of tapering also pressured gold. Wall Street climbed higher with the DJIA and the S&P 500 indices gaining +0.58% and +0.60% respectively.
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Commodities Dropped Despite Positive US Data
Gold prices climbed higher as the US dollar weakened and yields slipped on concerns over the disappointing US job data for December. The benchmark Comex contract initially rose to a 1-month high of 1255.3 before settling at 1251.1, up +0.34%. Crude oil prices, however, plunged as P5+1 entered into a new nuclear agreement with Iran.
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Gold Firmed as Investors Speculated Fed’s Monetary Outlook, Concerned about Earnings
In theory, the euro currency should be toast by now as the financial situation in many southern euro zone states just gets worse and worse, however it seems the ECB will do anything to keep their shared currency project together, but for the time being it’s back to sell mode.
Drama in Portugal
European stock markets have taken a tumble as the survival of Portugal’s coalition government is thrown into doubt today, Portuguese share prices plummeted 6 percent in early trading today and bonds spiked well above 7 percent this morning.
The resignation in quick succession of two of Portugal’s biggest political beasts has left many questioning whether the right of centre government, which has enthusiastically embraced austerity measures, can survive much longer. Traders and investors are once again reacting to growing political turmoil after Foreign Minister Portas resigned last night, a day after the shock departure of Finance Minister Vitor Gaspar amid growing unrest against austerity in the country.
Portugal is suffering its worst economic recession since the 1970s, with a unemployment rate at almost 18 percent. With youth employment more than twice that level, tens of thousands of members of the country’s most highly educated generation have been leaving to seek work abroad.
Greece Finances in a Mess – Again
Meanwhile, Greece now has three days to reassure Europe and the IMF that it can deliver on conditions attached to its bailout in order to receive its next bundle of aid, four euro zone officials said on Tuesday.
The lenders are unhappy with progress Greece has made towards reforming its public sector, a senior euro zone official involved in the negotiations said, while another said they might suspend an inspection visit they resumed on Monday.
Athens, which has about 2.2 billion euros of bonds to redeem in August, needs the talks to conclude successfully. If they fail, the IMF might have to withdraw from the 240 billion euro bailout to avoid violating its own rules, which require a borrower to be financed a year ahead.
Over the past three years, since Greece hit the panic button, Europe’s pain has been much examined, with inconclusive results.
The view that the 28 nation EU with Croatia joining this week, and particularly its 17 nation euro zone, is now a terminal clunker has become fashionable. The crisis that began in Greece has been controlled for now, but much of Europe, including France, is in recession. The questions triggered here about the future of Europe, and its common currency, the euro, are unresolved.
The Union that was the European miracle of the second half of the 20th century now embodies the malaise of the 21st century.
Euro – Reserve Currency Status
The euro’s existential crisis led to a decline in its use as a reserve currency in 2012, the ECB admitted in a report published yesterday.
The central bank blamed one of its favorite ‘betes noires’ the fragmentation of euro zone financial markets for most of the decline, pointing to the fact that the fortunes of reserve currencies are tied, as a rule, to the existence of broad and deep securities markets denominated in those currencies.
With five of the euro zone’s 17 members currently needing external support, the ECB acknowledged that perceptions of increased credit risk among the traditional issuers of reserve currencies had reduced appetite for euro denominated debt last year.
Anyone for Euro Toast?
The euro currency is surely toast soon and burnt toast at that. It’s simply not working and causing pain and misery across this once great continent. The dysfunctional EU experiment is the laughing stock of the civilised world and the euro remains deeply flawed, whilst the EU experiment is still being run by a bunch of failed national politicians.
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Euro currency is once again on sell mode as eurozone drama gets worse
Gold has been under selling pressure over 2013. The sharp selloff since mid-April has intensified such a trend and is a result of ETF selling and a stronger US dollar. The surge in gold investment through ETFs over the past few years was driven by the desire to hedge the systemic financial risk during the global financial crisis. Recent decline is a signal that this kind of demand has declined.
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Gold Prices Remain Weak while Crude Oil Climbs Higher ahead of US Data
Risky assets were under pressure last week amid speculations that the Fed would taper QE measures sooner than expected. Fed Chairman Bernanke said during the week that labor market conditions “have shown some improvement recently” but still remain “weak overall”. Although he also stated that “monetary policy does not have the capacity to fully offset an economic headwind of this magnitude”, he also suggested that “a step down” in the pace of purchases “in the next few months” might be warranted if policymakers see sustainable improvements in the economy.
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Weekly Fundamentals – US Enters Driving Season, Gasoline Demand in Focus
The shared currency of the euro zone has had a quiet time so far this month against the US dollar and other majors but concerns are once again growing that the EU and the euro are flawed which could lead to selling pressure on the currency anytime soon.
Latest Euro Exchange Rates
As of 08:15 GMT this morning, 1 euro bought $1.30270 USD (up 0.13 percent) and against GBP a euro bought £0.84270 (down 0.05 percent). The Euro fell below the $1.30 mark earlier this week and has weakened against the majority of its major currency peers after weak Purchasing Managers Index (PMI) data sent investors seeking shelter elsewhere.
Euro Crisis Remains
According to new findings from the polling organisation, Eurobarometer, a growing number of nationals in Spain, Britain, Germany, France, Italy and Poland have lost their trust in the EU, the Guardian reported on Wednesday. The surveyed countries jointly account for almost 350 million of the EU’s population of about 500 million.
The highest decline in confidence in the EU has been reported in Spain, where 72 percent are tending not to trust the EU, with only 20 percent tending to trust. Commentators say the mounting ‘Euroskepticism’ is regarded as a consequence of financial, currency and debt crises, harsh budget and spending cuts, and bailouts of the poor countries by rich nations.
The Spanish economy, the eurozone’s fourth biggest, contracted by 1.37 percent last year, the second worst yearly slump since 1970, and the government forecasts it will shrink again by between 1.0 percent and 1.5 percent this year.
ECB Interest Rate Cut
ECB (European Central Bank) interest rate cut expectations are mounting for a rate cut in May following run of disappointing economic news this week that has fueled market expectations that the bank will cut rates from a record low of 0.75 percent to stimulate the economy of the 17 European Union countries that use the euro.
However, as usual there are mixed feelings about the euro zone rates after top ECB official warned Thursday that another interest rate cut might not be much help for eurozone countries in recession — because already low rates are not getting through to businesses and consumers.
Joerg Asmussen, the bank’s top official for international relations, said that the “pass-through of rate cuts” would be “limited” since troubled banks are not able to send them on.
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Euro exchange rate holding up against majors but concerns are growing