Low oil prices put dampener on markets

Share Markets:

Markets were slightly risk averse on Friday night, driven by a weaker oil price. The Dow fell 0.1%, the S&P 500 recovered late in the session to finish unchanged and the Nasdaq climbed 0.4%.

Interest Rates: 

US government bond yields edged higher, boosted by stronger than expected CPI inflation data in the US, which drove speculation about Fed rate hikes.

Cleveland Fed President Mester (a hawk and a voting member of the FOMC) was cautiously upbeat on the US economy, saying she expected the US economy to work through the soft patch in economic data. She said the Fed should continue with "gradual reductions over time" in monetary accommodation.

Government bond yields in Germany, Japan and the UK continued to fall on Friday night, with ongoing uncertainty about the outlook for global growth supporting government bonds.

Australian government bond yields (implied by futures) edged higher on Friday night, retracing some of their sharp decline in Friday's session.

Foreign Exchange:

The US dollar index (against a basket of currencies) drifted lower on Friday. The US dollar weakened against the Yen. USD/JPY fell from a high of 113.38 on Friday morning, to trade at 112.49 at the time of writing.

Sterling gained ground against the US dollar early Saturday morning after UK Prime Minister Cameron reached a deal on membership terms with European Union (EU) leaders, which gave the UK "special status" in the EU.

Sterling, however, opened much weaker this morning after London Mayor Boris Johnson said he will be campaigning for the UK to leave the European Union ahead of the June referendum. GBP/USD fell from a high of 1.4409 on Saturday morning, to currently trade around 1.4266.

The Aussie dollar came under pressure on Friday after Reserve Bank of Australia board member John Edwards said he still thinks the Aussie dollar is "a bit too high" and that he would be more comfortable with the currency around 65 US cents.

AUD/USD fell to a low of 0.7069, but later rebounded to trade around 0.7150 currently.

Commodities:

Commodity prices were mostly weaker, led by a decline in the oil price after US crude stockpiles hit their highest level since 1930, according to the Energy Information Administration.

Australia:

There was no local data to report on Friday.

Europe:

Eurozone consumer confidence fell to a reading of -8.8 in February, from -6.3 in January, according to the European Commission measure.

United Kingdom:

Retail sales rose 2.3% in January, after falling by a downwardly revised 1.3% in December (previously reported as a 0.9% decline). For the year to January, retail sales increased by 5.2%, up from a 2.3% increase in the year to December.

United States:

US CPI was flat in January, beating consensus expectations for a 0.1% decline. For the year to January, CPI rose 1.4%, up from 0.7% in the year to December.

Core CPI (excluding food and energy) rose 0.3% in January. This took the annual rate up to 2.2% for the year to January, a 3½-year high.



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