OVERNIGHT MARKET UPDATE:
· US – The Federal Reserve left
the fed funds rate unchanged. The GDP forecasts for 2016 were revised lower on
global growth risks and tepid business investment. While oil has provided a
downward shock to headline inflation, the more-important core inflation
forecasts were unchanged for 2016, in line with recent data. Unemployment
forecasts were also revised down, completing a rather mixed picture.
· US – The February CPI report
was better than market expectations with the headline annual rate at 1.0% and
core (ex food and fuel) pushing up to 2.3% y/y. That was core's highest rate
since May 2012 and should lift confidence that inflation will return to trend
if oil is stabilising.
· US – The February industrial
production fell 0.5% m/m as utilities output fell 4.0% and mining dropped 1.4%.
However, manufacturing output rose 0.2% following January's 0.5% gain.
· UK – The unemployment rate
held steady at 10-year low of 5.1% and wage growth accelerated during the
November to January period. The number of people claiming unemployment related
benefits decreased by 18,000 to 716,700 in February, reaching its lowest level
since April 1975.
· Currencies – The dovish
surprise from the Fed sent the USD sharply lower. EUR/USD rebounded back above
1.12.
· Equities – US equities treaded
water prior to the Fed before turning around to post modest gains on the Fed’s
more dovish outlook.
· Rates – In response to the
Fed, US Treasuries saw yields fell markedly, down 10 bps for the 2-year bond
and 3 bps for the 10-year bond.
· Energy – Crude oil prices rose
on USD weakness and ahead of an OPEC meeting in April that will discuss capping
oil production. The Qatar energy minister stated producers are expected to meet
on 17 April in Doha.
· Precious Metals – Gold prices
spiked higher after a more dovish Fed and the weakening of USD.
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