The U.S. consumer price index gained just 0.1% in March as a drop in the cost of food partly offset a reasonably robust rebound in gasoline prices. That gives rise to speculation that the Fed will not raise interest rates.
BUT, against expectations for 270,000 new jobless claims last week, the U.S. saw only 253,000 claims. This suggests that the labor market remains in third, if not fourth, gear. That, as you have probably assumed already, fuels thoughts that the Fed will raise rates.
BUT number two: yes, core inflation with its variable components is essentially stagnant. Housing, medical expenses, education and some travel costs are not part of the core, and inflation in those areas is out of control.
BUT number three: unemployment applications have stayed below 300,000 for 58 straight weeks, the longest consecutive period since 1973 – an even more impressive figure once we take into consideration the difference between U.S. population then and now. The country has grown by more than 100 million people in the intervening 43 years.
Bank of Japan Governor Haruhiko Kuroda said that the central bank was ready to significantly expand monetary stimulus yet again if recent weaknesses in inflation expectations persist. He seemed particularly eager to underscore the idea that there were "many ways" to achieve his pricing targets.
BUT number four: even light-handed dovish comments from the Federal Reserve Bank of the United States are sending the dollar down against the yen. Many consider this “unnatural” or at least ahistorical within the previous 25-year timeframe.
The stringer yen is keeping a lid on Japanese stock prices while the whole dynamic is serving as a proxy for a sclerotic economy – one that is very big but only growing or contracting within a range and lurching around in that range.
Let’s see what this means to today’s markets.
Gold found itself on course for its worst session in three weeks. A stronger dollar hurts gold prices, but our sense is that the dollar is about to find its sweet spot and gold will be trading without the help or hindrance of the greenback very soon.
Although not as volatile as gold today, silver also lost some of its gleam, falling about 0.40% after a solid week.
Crude has had a very solid run as of late.
BUT number five: it is artificially high and when it declines again, after the Doha talks this weekend fail, it will depress equities and help to keep inflation very low.
An interesting side note, while the International Energy Agency is predicting a solid uptick in consumption later in 2016, it also is saying that output has been increasing in – Russia – one of the countries trying to install production freezes among producer countries. Saudi Arabia has said it isn’t buying a freeze and Iran is basically telling everyone in OPEC and out to take a hike. Iran won’t bargain until it makes up much of the revue lost while sanctions were in place.
U.S. equities were mixed in choppy trading action. Europe and Asia were up healthily.
The U.S. was digesting data dumps on its economy while other parts of the world were trading on their particulars.
The 0.6% fall in oil didn’t seem to faze stock traders. The Dow was up most among the U.S. indexes, rising 1.00% in afternoon trading.
Wishing you as always, good trading,