China’s consumer price index rose 1.5% last month from a year earlier, according to the National Bureau of Statistics, compared to analysts’ estimates of 1.4% and October’s 1.3%. The increase was boosted by a rise in food and services prices.
“While there is no disputing that the China economy is slowing down, this release at least provides optimism that the multiple measures taken by both the PBoC and Beijing to uplift the economy have had some sort of positive impact on inflation,” said FXTM research analyst Lukman Otunuga.
China producer prices fell 5.9% in November from a year ago, less than the 6% decrease expected and following a 5.9% drop in October.
Meanwhile China set the yuan at 6.414 to the US dollar on Wednesday, its weakest level since August 2011, as the nation tackles currency outflows and an economic slowdown.
In a boost to the market, oil prices rebounded with Brent rising 1.03% to $40.68 per barrel and West Texas Intermediate increasing 1.1% to $37.93 per barrel by 1622 GMT.
“Coming off the back of today’s US dollar weakness and a rebound in UK commodity stocks, this afternoon’s spike in crude prices is a welcome reprieve for indices that are following oil prices higher,” said IG analyst Josh Mahony.
Closer to home, the Bank of England warned of volatility of capital flows if the US Federal Reserve raises interest rates next week. The Fed is widely expected to raise rates. The record of the BoE’s Financial Policy Committee meeting in November said: “Capital flows had been sensitive to diverging prospects for monetary policy around the world and there was a risk of further volatility in capital flows as that policy divergence progressed.”
In the Eurozone, German exports fell 1.2% month-on-month in October, worse than the 0.6% drop forecast by analysts and after a 2.6% increase in September. Imports declined 3.4% in October, compared to analysts’ estimates for a 1% decrease and the previous month’s 3.8% increase.
Across the Atlantic, wholesale inventories in the US declined 0.1% compared with analysts’ expectations for a 0.1% gain, according to the Commerce Department.
The Mortgage Bankers Association said its seasonally adjusted index of US mortgage application activity, which covers home purchase demand and refinancing demand, climbed 1.2% in the week ended 4 December.
On the company front, Ashtead jumped after the equipment hire group upgraded its guidance as it reported solid gains in first half revenue and profit.
Anglo American slid for a second day after it said on Tuesday that it plans to scrap its dividend for this year and the next and axe jobs amid a “radical” portfolio restructuring to combat falling commodity prices. Jefferies downgraded its stance on the stock to ‘underperform’ from ‘hold’ and took an axe to the target price, chopping it to 275p from 635p.
Pearson was also under the cosh after Deutsche Bank cut its price target on the stock to 770p from 950p.
Rio Tinto bounced back a day after announcing it was cutting capital spending to shore up its balance sheet amid a slump in commodity prices.
Stagecoach plunged as it said the Paris terror attacks in November has discouraged people from travelling and led the company to slightly revise full year earnings downwards.
FirstGroup advanced after the company said it would continue to operate the Trans Pennie franchise until at least 2023.
Entertainment One gained as it confirmed that the company continues to trade in line with full year underlying earnings expectations, as it responded to recent weakness in its share price. The stock has been under pressure since the company announced a refinancing deal that will increase its interest payments.
Metal futures saw further upticks on Wednesday, over a less volatile session despite unconvincing macroeconomic data but oil benchmarks continued to slide further.
At 1758 GMT, the Brent front month futures contract was down 1.02% or 34 cents at $39.85 per barrel, while the WTI was down 0.72% or 27 cents at $37.17 per barrel.
Kash Kamal, senior analyst at Sucden Financial, said, “Investors are still reeling over the effects of last week’s OPEC meeting together with weaker than expected Chinese trade data [overnight] exerted significant downward pressure on the crude oil market.
“Prices for the global benchmark lost over 6% yesterday as the fallout from OPEC’s indecision to come to an agreement exposed the oil market to further weakness.”
Away from the oil market, most metal futures saw upticks during late afternoon trading in Europe. At 1635 GMT, three-month delivery contracts of primary aluminium (up 0.5%), tin (up 0.6%), lead(up 1.5%) and zinc (up 0.9%) were trading higher on the London Metal Exchange.
The copper contract, still at historic lows, remained under pressure up 0.1% to $4,592.50 per metric tonne.
Precious metals complex remained under pressure as well with many traders pricing in a US interest rate hike. COMEX gold futures contract was down a further 0.14% or $1.50 to $1,073.90 an ounce, while spot gold was 0.17% or $1.84 higher at $1,076.80 an ounce.
COMEX silver was up 0.21% or three cents to $14.15 an ounce, while spot platinum was up 1.83% or $15.50 to $863.53 an ounce.
Finally, agricultural commodity futures were on a mixed patch in early trading stateside. CBOT corn (down 0.27%), ICE cotton (down 0.22%) and CME live cattle (down 2.22%) futures were trading lower. However, CBOT wheat (up 1.30%) and ICE cocoa (up 1.78%) futures posted decent upticks.
The dollar lost momentum on Wednesday after inventories in the US suffered an unexpected decline in October.
According to the Commerce Department, inventories declined 0.1% compared with analysts’ expectations for a 0.1% gain.
September’s advance was revised down to show a 0.2% increase compared with an initial estimate of a 0.5% rise. Inventories of durable goods, such as autos and machinery, declined 0.1% compared with a 0.6% drop in September, while inventories of non-durable goods fell 0.1% after a 1.5% gain in the previous month.
Meanwhile, wholesales were flat in October, following a 0.5% gain in September and, as a result, the inventory-to-sales ratio held steady at 1.31 in October.
At 1657 GMT, the dollar fell against the yen by 0.87% changing hands at JPY121.86. Concurrently, the pound rose 1.07% against the dollar exchanging at $1.5168, while the euro rose 0.86% to change hands at $1.0986, inching away from parity against the greenback.
Continuing with major crosses, the greenback fell 0.59% against the Swiss franc exchanging at CHF0.9865, slipping further below parity in the dollar’s favour during late European trading. Meanwhile, the pound sterling rose against the euro fetching €1.3809 up 0.20%.
Elsewhere, the dollar had a mixed day against selected commodity-linked currencies; down 0.94% against the Norwegian Krone changing hands at NOK8.7072, but up 0.09% and 0.22% against the Canadian dollar and Mexican peso, changing hands at CAD$1.3597 and MXN17.0594.
Finally, the Australian dollar fell further against its US counterpart by 0.12% changing hands at US$0.7206, while the New Zealand dollar fell 0.26% changing hands at US$0.6630.
Kit Juckes, head of forex at Societe Generale, said, “Commodity markets are quiet even as the press is dominated by their weakness. And there’s a dearth of news to drive direction. Such as it is, Chinese CPI inflation picked up to 1.5% from 1.3% last month, though PPI remains at -5.9% year-on-year.
“The main event overnight (apart from the lack of a further fall in oil prices) was the highest PBoC fix for USD/CNY since 2011 at 6.414. USD/CNY is at 6.49, barely higher than yesterday and markets seem unbothered but even so, we expect Chinese forex policy be one of 2016s biggest market drivers. And we don’t see much reason for cheer here for Asian currencies.”
Kind regards,
Karen Castaneda
