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Financial markets review – 18 March 2016

Monday 14 March

  • US import price index reading for February was less deflationary than expected (-0.3% MoM vs. -0.7% expected).
  • February CPI reading for Germany +0.4% MoM confirming a leg lower in the YoY rate to 0.0% (from +0.5% in January).
  • Italian January industrial production reading was much higher than expected at +1.9% MoM (+0.7% expected)
  • Eurozone industrial production (YoY) in Jan greatly exceeds expectation of 1.4%.

Tuesday 15 March

  • US retail sales last month (-0.1% MoM vs. -0.2% expected) and core (+0.3% MoM vs. +0.2% expected) were a little better than expected but it was a material downward revision to the January readings. The Atlanta Fed downgraded their Q1 GDP forecast for this year to 1.9% from 2.2% previously on the back of this data.
  • Headline PPI last month was in line following a -0.2% MoM decline, while the core was also as expected at +0.1% MoM. The big positive surprise came from this month’s empire manufacturing print which saw a robust 17pt rise to +0.6 (vs. -10.5 expected) and the highest since July 2015.
  • Bank of Japan kept the base interest rate unchanged at -0.10%, in line with market expectation.

Wednesday 16 March

  • In the UK the Budget was announced for the new fiscal year, UK 2015 GDP size was revised down by £18 billion, whilst the growth rate is down to 2% from 2.4%. The long-term growth rate forecast is reduced to 2.2% (from 2.7%). An unspecified spending cut of £3.5 billion was also annouced.
  • The US Federal Reverse lowered their medium term interest rate projection, with 2016 median rate target reduced by 50bps to 0.875%, whilst the 2017 and 2018 median targets are reduced to 1.875% and 3% respectively, which are 50bps and 25bps lower than the projections in December.
  • US core inflation in February was up more than expected +0.3% MoM (vs. +0.2% expected) which has helped to nudge the YoY rate to +2.3% the highest in five years.
  • US industrial production had a -0.5% MoM decline in February (-0.3% expected) with utilities and mining output both contributing to the slump. Capacity utilisation was down to 76.7% (vs. 76.9% expected)
  • Latest US manufacturing production data showed a better than expected +0.2% MoM gain (vs. +0.1% expected).

Thursday 17 March

  • The Bank of England kept its base rate unchanged at 0.5%. no change in policy after a unanimous confirmation vote of 9-0.
  • The Swiss central bank also decided to keep its base interest rate unchanged at -0.75%.
  • US initial jobless claims printed at 265k for last week (vs. 268k expected) which was up a modest 7k on the prior week. Philadelphia Fed Manufacturing data came in much stronger than thought at 12.4 vs (-1.7 expected)
  • In the UK we saw no change to the ILO unemployment rate at 5.1%. Earnings data was, better than expected with weekly earnings growth excluding bonuses up +2.2% YoY in the three months to January (vs. +2.1% expected).
  • In Europe the final revision to the February CPI report for the Euro area was confirmed at -0.2% YoY at the headline, but revised up one-tenth at the core to +0.8% YoY.

Friday 18 March

  • China house prices (YoY) in Feb exceeded expectations at 3.6% vs 2.5%.
  • German PPI (MoM) in Feb came in short of expectation at -0.5% (vs. -0.2%). The Eurozone labour cost in Q4 (YoY) is also below expectation at 1.3% (vs. 1.5%).
  • Canada’s Core Retails Sales was much higher than expected at 1.2% compares to 0.4% whilst CPI (YoY) remains in line with expectation at 1.9%.
IndexActual priceWeek to dateMonth to dateYear to date
S&P 5002048.51.36.0-0.2
Eurostoxx 600342.1-0.02.4-6.5
Nikkei16724.8-1.34.4-12.1
MSCI Emerging Markets816.92.010.32.9
FTSE 1006225.941.402.11-0.26
Treasury yield 10 years1.87-0.110.14-0.40
Bond yield 10 years0.21-0.070.10-0.42
Gilt yield 10 years1.44-0.140.10-0.52
USD vs Sterling1.4490.734.10-1.69
Sterling vs Euro0.780-0.610.16-5.52
USD vs Emerging Markets FX67.7480.884.493.22
Commodity Index178.12.69.1-1.1
Gold1252.90.31.118.1
Brent Oil41.21.914.410.4

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