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Turmoil in Financial Markets, Despite Upbeat U.S. Economic Data

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Turmoil In Financial Market

The highlights of the previous week were the release of better-than-expected official data on U.S. retail sales and initial jobless claims, following disappointing data fuelling concerns over the outlook of China’s economy and tensions between Russia and the West over Crimea annexation.

U.S. retail sales and initial jobless claims

Turmoil In Financial Market

Turmoil In Financial Market

The U.S. Commerce Department reported on Thursday, March 13, that retail sales rose by a seasonally adjusted 0.3% in February for the first time in three months. The median forecast was expecting a 0.2% rise. Retail sales for January were revised down to a 0.6% drop from a previously reported decline of 0.4%.

Core retail sales, which exclude automobile sales, also rose 0.3% last month, compared to forecasts for a 0.2% increase. Core sales in January were revised down to a decline of 0.3% from a previously reported flat figure. The rise of retail sales signifies a rebound in demand, which was previously affected by harsh weather conditions, while easing concerns over the outlook of the U.S. economic recovery.

A separate report released from the Department of Labor the same day, showed that the number of people who filed for unemployment assistance in the U.S. last week (week ended March 8) declined unexpectedly, reaching the lowest level since late November. The number of initial jobless claims declined by 9,000 to 315,000, from the previous week’s revised total of 324,000. Analysts anticipated jobless claims to increase by 6,000 to 330,000 last week.

The stronger-than-expected data published on the economic calendar of the day, showed signs of improvement in the labor market and enhanced the assessment that the Federal Reserve is likely to continue to progressively taper its bond-buying programme. TeleTrade analysts commenting on the figures, said: “Stronger job and income growth should develop a more advantageous background for increased consumer spending”.

Chinese economy declines

Despite the upbeat U.S. figures, market sentiment remained jittery, following data released earlier in the day, showing that Chinese industrial production increased 8.6% over the first two months of the year, the weakest over the same period since 2009 and below forecasts for a 9.5% rise. At the same time, Chinese retail sales rose by a smaller-than-forecast 11.8% in the same period a year earlier, which is the slowest since 2004. The weak data came just days after China released a report showing that exports declined greatly in February, pointing strong signs of slowdown in the world’s second largest economy.

Standoff in Ukraine

Meanwhile, investors remained wary after Russia initiated new military exercises near its border with Ukraine on Thursday, 13, showing no intention of retreating on plans to annex Crimea. This came only one day after U.S President Obama warned that unless Russia pulls back from ratifying a referendum on Crimea joining Russia, the U.S. and Europe will be forced to impose considerable sanctions, as a cost to Russia’s breaches of international law. President Obama’s comments came after G-7 leaders warned Russia not to proceed with Crimea annexation, as they would respond with further severe actions.

Gold to a 6-month high

Gold prices reached a six-month high for the second consecutive day on Thursday, as demand for safe haven assets remained greatly supported, among rising concerns over the turmoil in Ukraine. On March 13, gold futures for April delivery on the Comex division of the New York Mercantile Exchange rose to a session high of $1,375.40 a troy ounce – the highest since September 9, 2013 – before edging down to last trade at $1,365.70 during U.S. morning hours.

Euro to 2-1/2 year high

The single currency hit a two-and-a-half year high against the greenback on Thursday, following last week’s decision by ECB to hold off on implementing stimulus measures and leave monetary policy unchanged, amid improved outlook of the Eurozone’s economy. EUR/USD rose to 1.3966, the strongest since October 31, 2011 and was last trading up 22% to 1.3934. On Wednesday, Benoit Coeure – ECB member – stated the monetary authority saw no signs of deflation in the Eurozone, while Peter Praet – ECB chief economist – said that the Eurozone’s economy has improved over the last two years.

Dollar remains weak

Although the U.S. dollar found some support on Thursday, after the release of upbeat retail sales and initial jobless claims figures, it remained weaker than other major currencies. The greenback fell to the lowest point of the week against the yen, as soft economic data from China triggered risk dislike, while the Australian and New Zealand dollars rose after better than anticipated Australian jobs data and a rate increase from the Reserve Bank of New Zealand. The dollar also dipped to two-and-a-half year lows against the Swiss franc. USD/CHF dropped to 0.37% at 0.8705, the weaker since October 31, 2011, as concerns over China and standoff in Ukraine fuelled safe haven demand.

The dollar was little changed against major currencies on Friday, 14. It remained well below the euro and the yen, with EUR/USD up 0.17% to 1.3891 and USD/JPY falling 0.18% to 101.61. It changed little against the Swiss franc, as USD/CHF was down to 0.8742 by 0.03%. Moreover, the greenback remained unchanged against the Australian, New Zealand and Canadian dollars. AUD/USD rose 0.03% to 0.9034, NZD/USD inched 0.02% to 0.8543 and USD/CAD added 0.06% to 1.1080. On Friday, 14 the U.S. dollar index was down 0.08% to 79.66.

Sterling stays higher

Sterling remained higher against the greenback on Thursday, 13. GBP/USD rose to 1.6717 on U.S. morning trade, the strongest since March 10 and consolidated at 1.6687 up 0.41%. Cable remained steady against the dollar on Friday, amid the release of soft U.K trade deficit data. GBP/USD traded on 1.6594 on European morning trade, the lowest since Wednesday and consolidated at 1.6617 up 0.04%.

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Oil extends losses as Texas prepares to ramp up output after freeze

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Oil extends losses as Texas prepares to ramp up output after freeze 1

By Devika Krishna Kumar

NEW YORK (Reuters) – Oil prices fell for a second day on Friday, retreating further from recent highs, as Texas energy companies began preparations to restart oil and gas fields shuttered by freezing weather and power outages.

Brent crude futures ended the session down $1.02, or 1.6%, at $62.91 a barrel while U.S. West Texas Intermediate (WTI) crude fell $1.28, or 2.1%, to settle at $59.24.

For the week, Brent gained about 0.5% while WTI fell about 0.7%.

This week, both benchmarks had climbed to the highest in more than a year.

“Price pullback thus far appears corrective and is slight within the context of this month’s major upside price acceleration,” said Jim Ritterbusch, president of Ritterbusch and Associates.

Unusually cold weather in Texas and the Plains states curtailed up to 4 million barrels per day (bpd) of crude production and 21 billion cubic feet of natural gas, analysts estimated.

U.S. energy firms this week cut the number of oil rigs operating for the first time since November, according to Baker Hughes data.

Texas refiners halted about a fifth of the nation’s oil processing amid power outages and severe cold.

Companies were expected to prepare for production restarts on Friday as electric power and water services slowly resume, sources said.

“While much of the selling relates to a gradual resumption of power in the Gulf coast region ahead of a significant temperature warmup, the magnitude of this week’s loss of supply may require further discounting given much uncertainty regarding the extent and possible duration of lost output,” Ritterbusch said.

Oil prices fell despite a surprise drop in U.S. crude stockpiles last week, before the big freeze hit. Inventories fell 7.3 million barrels to 461.8 million barrels, their lowest since March, the Energy Information Administration reported on Thursday. [EIA/S]

“Vaccines and the impressive rollouts we’ve seen have delivered strong gains, as have the efforts of OPEC+ – Saudi Arabia, in particular – and the big freeze in Texas, which gave oil prices one final kick this week,” Craig Erlam, senior market analyst at OANDA, said.

“With so many bullish factors now priced in, it seems we’re seeing some of these positions being unwound.”

The United States on Thursday said it was ready to talk to Iran about returning to a 2015 agreement that aimed to prevent Tehran from acquiring nuclear weapons. Still, analysts did not expect near-term reversal of sanctions on Iran that were imposed by the previous U.S. administration.

“This breakthrough increases the probability that we may see Iran returning to the oil market soon, although there is much to be discussed and a new deal will not be a carbon-copy of the 2015 nuclear deal,” said StoneX analyst Kevin Solomon.

(Additional reporting by Ahmad Ghaddar in London and Roslan Khasawneh in Singapore and Sonali Paul in Melbourne; Editing by Marguerita Choy, David Gregorio and Nick Macfie)

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FTSE 100 ends higher on improving economic activity; gains for the third week

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FTSE 100 ends higher on improving economic activity; gains for the third week 2

By Shivani Kumaresan, Amal S and Shashank Nayar

(Reuters) – London’s FTSE 100 ended higher on Friday after the economy showed signs of improvement this month and was set to gain for the third consecutive week as investors bet that vaccine rollouts would spur economic growth.

British firms fared less badly during February’s lockdown than feared and are upbeat about the prospects for growth later in 2021 when they hope the roll-out of vaccines will allow a major relaxation of COVID-19 restrictions, a survey showed.

The blue-chip FTSE 100 index ended 0.1% higher with miners and banking stocks gaining the most, while the mid-cap index gained 0.5%.

“There is optimism and hope that the vaccine rollouts will eventually help the economy improve while the market is awaiting the government’s lcokdown easing plans to be revealed next week,” said Keith Temperton, an equity sales trader at Forte Securities.

However, data on Friday showed British retail sales tumbled much more than expected in January as non-essential shops went back into coronavirus lockdowns.

The FTSE 100 has recovered nearly 35% from its March 2020 lows and is nearly 13% away from its highest level last year as record stimulus measures and massive vaccine rollouts helped improve investor confidence.

NatWest gained 5.2% and was the third biggest gainer on the FTSE 100 index after it said it would wind down its Irish arm Ulster Bank, as Chief Executive Alison Rose continues to slash away at underperforming parts of the state-owned lender after it swung to a loss in 2020.

Segro Plc rose 1.5% after the real estate investment trust reported a near 11% jump in annual profit for 2020.

Banking group TBC Bank fell 6.1% after a slump in annual underlying profit due to lower interest rates and limited lending growth in the fourth quarter from the COVID-19 pandemic.

 

(Reporting by Shivani Kumaresan and Amal S in Bengaluru; Editing by Vinay Dwivedi, Krishna Chandra Eluri and Jonathan Oatis)

 

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UK bond yields head for biggest weekly rise since June

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UK bond yields head for biggest weekly rise since June 3

LONDON (Reuters) – British government bond prices fell again on Friday as a global debt sell-off continued on expectations of hefty U.S. fiscal stimulus, putting gilt yields on course for their biggest weekly rise since June.

The spread between yields on British 10-year debt and its German equivalent widened to 100 basis points for the first time since March, partly reflecting the faster roll-out of COVID vaccines in Britain which has lifted some of the country’s economic gloom.

Ten-year gilt yields peaked at 0.693% at 1429 GMT, their highest since March 20 during the so-called “dash for cash” at the onset of the pandemic.

Based their latest level they are on course of just under 17 basis points the biggest since the week to June 5.

Sterling also rose above $1.40 for the first time in nearly three years on Friday although it was flat against the euro.

Gilt yields surged at the start of the COVID pandemic due to a scramble for U.S. dollar assets, until the Bank of England calmed markets by restarting its bond purchase programme.

If yields stay where they are, February will see the biggest increase in 10-year gilt yields since October 2016, when markets judged Britain’s referendum vote to leave the EU was having less of an immediate impact on the economy than first thought.

(Reporting by David Milliken; Editing by William Schomberg)

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