- U.S. Consumer Price Index Rises Amid Surge in Gasoline Prices
Rising gasoline prices boosted Consumer Price Index in September but not enough to validate December rate hike.
The Consumer Price Index rose 0.5 percent in September, according to the Labor Department report released on Friday. This is better than the 0.4 percent increase recorded in August but slightly below the 0.6 percent expected by economists. The highest since January 2017.
On a yearly basis, consumer prices rose to 2.2 percent, up from 1.9 percent in August. Thanks to the surge in gasoline prices that climbed 13.1 percent in September and contribute 75 percent of the total gain in the month. Also, the highest increase in gasoline prices since June 2009.
The gain has been attributed to the Hurricane Harvey disruption that impacted refinery capacity in the month. However, outside gasoline, price pressures were weak as it can be seen in the core Consumer Price Index excluding volatile food and energy components that climbed just 0.1 percent in September and has now been below estimates for the sixth time in seven months.
Also, consumer-inflation gauge preferred by the Fed rose to 1.4 percent in the 12 months through August, still below the central bank’s 2 percent target. Another indication of weak price pressures amid record-low unemployment rate.
“Energy clearly played a part but overall pressures are still not fast enough to produce a pace of annual inflation that’d suggest we’re that much closer to the Fed’s objective,” said Sam Bullard, senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina.
This is why in the minutes of the Fed’s 19-20 meeting published on Wednesday policymakers said strong incoming data is needed before December rate hike decision and worried “the low inflation readings this year might reflect not only transitory factors, but also the influence of developments that could prove more persistent.”
The U.S. dollar fell against most of its counterparts on Friday to trade at $1.3337 against the pound sterling and plunged even more against emerging currencies like Yen, Kiwi and Aussie dollar to 111.67, 0.7195 and 0.7896 respectively.
The market uncertainty remains very high after President Donald Trump disavow Iran’s deal on Friday and this is expected to weigh on the American market as Iranian Government backed by other top nations has promised to respond.
Barclays Tell High Net Worth Investors to Shun Africa and Other Emerging Economies
Barclays to High Net Worth Clients, Stay Off Africa and Other Emerging Economies
Barclays, one of the world’s largest investment banks, has started advising high net worth clients to stay off Africa and other emerging economies.
According to Barclays, despite the recent recovery noticed in emerging-market stocks, investors are better off avoiding the risks that still abound in emerging nations. Barclays Plc, however, advised high net worth clients to focus on U.S equities despite the S&P’s breakneck rally.
The investment bank said emerging economies do not have enough fiscal buffers to spend their way out of the COVID-19 pandemic and will likely continue to struggle in the near-time compared to the US with 12 percent of gross domestic product fiscal-support.
It said the huge US stimulus may halt rebound in emerging-markets stocks as more money is expected to flow into the world’s largest economy and its European counterparts.
“Compared to the U.S., emerging-market economies appear more vulnerable,” said Haider, the London-based managing director and head of global growth markets. “Their central banks have less room to maneuver, their governments may not be able to provide unlimited support and equity markets, given their sector mix, can be more challenged by an economic slowdown.”
Barclays added that even after 33 percent rebound in stocks of emerging markets since the panic selloff subsided in March, stocks are still down by 9 percent from year-to-date while the US S&P 500 stocks are up by 45 percent. Presently, their stocks trading at a 36 percent discount to US stocks, up from 25 percent three months ago.
Crude Oil Rises to $43.1 Per Barrel on Production Cuts Extension
Crude Oil Hits $43.1 Per Barrel Following OPEC’s Production Cuts Extension
Brent crude oil, against which Nigerian oil price is measured, rose by 1.25 percent on Monday during the Asian trading session following OPEC and allies’ agreement to extend crude oil cuts to the end of July.
OPEC and allies, known as OPEC plus, agreed to extend production cuts of 9.7 million barrels per day reached in April to July on Saturday.
In the virtual conference, delegates agreed that members, including Nigeria and Iraq presently struggling to attain a 100 percent compliance level must keep to the agreement or be forced to do so in subsequent months.
Nigeria, Iraq and others failed to keep to the cartel’s agreement in May after reports show that Nigeria only managed to attain a 19 percent compliance level during the month while Iraq struggled to attain just 38 percent in the same month.
Russia and Saudi Arabia, the two largest producers of the group, warned members to stick to the agreed quota if they want to rebalance the global oil market.
“While the errant producers such as Iraq and Nigeria have vowed to reach 100% conformity and compensate for prior underperformance, we still think they will likely continue to have some commitment issues over the course of the summer,” said Helima Croft, head of global commodity strategy at RBC Capital Markets.
“The potential return of Libyan output could also cause considerable challenges for the OPEC leadership.”
Earlier on Monday, Brent crude oil hits $43.1 per barrel, more than a month record-high, before pulling back slightly to $42.83 per barrel.
Gold Dips by 2 Percent on Better Than Expected Job Report
- Gold Dips by 2 Percent on Better Than Expected Job Report
Gold prices declined by 2 percent on Friday following a better than expected US non-farm payroll report.
The report showed an increase of 2.5 million payroll numbers against a decline of 7.5 million predicted by many experts.
The surprise number boosted investors’ confidence in US recovery as many dumped their haven investment (gold) for the stock market.
“We had significantly stronger-than-expected U.S. payroll numbers – an increase of 2.5 million versus an expectation of a decline of 7.5 million – that 10-million swing has brought forward expectations of the economic recovery in the United States,” said Bart Melek, head of commodity strategies at TD Securities.
Spot gold immediately declined by 1.9 percent per ounce to $1,678.81 while the U.S. gold futures slid 2.6 percent to settle at $1,683.
Gold was also being pressured by stronger yields and a slightly firmer dollar, “meaning the opportunity cost to hold gold in the portfolio has gone up,” Melek added.
The surprise didn’t stop there, US Dow Jones was up 614 points despite the protest going on the US and US-China tension.
Also, NASDAQ rose by 29 points while the S&P index added 50 points increase.
Note: Investors generally increase their investments in gold and other haven assets during a crisis to avert risk exposure and do the opposite once they sense a better economy.
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