Grow Finance Services Focus Reports Market Sentiment Weighed Down by Geopolitical Uncertainties, Crude Prices Plunged as Inventory Soared With a light economic calendar, the market focus was on RBNZs rate hike decision and the Wests reactions over the upcoming referendum in Crimean on Sunday. Investors remained cautious and profit-taking continued in the US market. Wall Street was under pressure in the morning session but losses were pared later in the day. The DJIA ended the day -0.07% lower while the S&P 500 index added a mild +0.03% at close. In the commodity sector, the front-month contract for WTI crude oil declined for the third consecutive day to a 1-month low of 97.55 before settling at 97.99, -2.04%. Gains in US crude inventory also pressured price. Gold strengthened further with the Comex contract surging to the highest level since September last year before ending the day +1.775 higher. As the Crimean referendum on whether to join Russia approaches, the G7 issued a joint statement urging Russia to address any ongoing security or human rights concerns that it has with Ukraine through direct negotiations, and/or via international observation or mediation under the auspices of the UN or the Organization for Security and Cooperation in Europe. Its also confirmed in the statement that preparations for the G8 summit scheduled to take place in Sochi in June have been suspended until the environment comes back where the G-8 is able to have meaningful discussion. US Secretary of State John Kerry has also scheduled to hold talks with Russian officials before the referendum takes place on Sunday. The situation remains unclear and the Russia-Ukraine crisis is expected to haunt the market for some time. In New Zealand, the RBNZ raised the OCR by +25 bps to 2.75% in March. It also updated the economic projections, showing more confidence about the outlook. Policymakers now expect the economy to grow +3.3% by end-2014 (vs +2.8% previously) before moderating to +2.4% by end-2015 (vs +2.1% previously) and +2.3% by end-2016. Inflation would increase to +1.9% by end-2014, up from previous forecast of +1.5%, while that for end -2015 stayed unchanged at +2.1%. The forecast for end-2016 is also +2.1%. The central bank also upgraded modestly the forecast for the 90-day bank bill rate, signaling a slightly higher cash rate. It now expects the bill rate to reach 4% by end-2014 (vs 3.8%previously) and 4.8% by end-2015 (vs 4.6% previously). It also introduced the forecast for end-2016, at 5.2%. on the exchange rate, the RBNZ warned that the currency remains unsustainably high and this remains a headwind to the tradables sector but the external sector can now explain more of the exchange rates high level than previously thought. The message sent after the meeting is that more tightening is to come. We expect further rate hikes in April and June while policy decisions in the second half of the year are less certain and more dependent on global economic developments. On oil inventory, the DOE/EIA reported that total crude oil and petroleum products stocks fell -1.57 mmb to 1033.29 mmb in the week ended March 7. Crude stockpile jumped +6.18 mmb to 370.00 mmb as inventory soared +7.46 mmb in PADD 3. Cushing stock slipped -1.34 mmb to 30.79 mmb. Utilization rate was down -1.4% to 86.0%. Gasoline inventory dropped -5.23 mmb to 223.77 mmb as demand increased +6.40% to 8.95M bpd. Production rose +3.54% to 9.36M bpd while imports added +19.70% to 0.40M bpd. Distillate inventory slipped -0.53 mmb to 113.94 mmb as demand rose +4.26% to 3.70M bpd. Imports fell -32.92% to 0.27M bpd while production added +0.13% to 4.61M bpd during the week.
Posted on: Thu, 13 Mar 2014 08:53:18 +0000
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