Oil dives, sending U.S. crude below $50 for first time in two weeks

Oil prices tumbled more than 2 percent on Friday, notching the biggest weekly decline in more than a month on mounting evidence that U.S. production and inventory growth were offsetting OPEC’s attempts to reduce the global crude glut.

Brent futures <LCOc1> settled at $51.96 a barrel, down $1.03, or 2 percent at the market’s close. U.S. crude futures <CLc1> ended at $49.62 a barrel, down 2.2 percent, or $1.09.

Volumes were heavy, with more than 665,000 WTI futures changing hands, surpassing the daily average of 525,000 contracts.

For the week, Brent fell 7 percent, while U.S. crude lost 6.7 percent. It was the largest percentage drop for both benchmarks since the week of March 10, when rising concern about the supply glut undermined big bets on an oil rally.

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Shanghai is now the world’s largest international trading city

Official figures are suggesting Shanghai is now the world’s largest international trading city due to the government’s measures to encourage and upgrade trade.

Imports and exports through the city’s ports were nearly 6.9 trillion yuan last year, accounting for 28.3 percent of national value and 3 percent of global trade.

Shanghai overtook Hong Kong and Singapore to be the largest international trading city.

An official says this is a result of the government’s efforts to cut red tape, encourage cross-border e-commerce platforms and support development of local brands.

He said Shanghai’s foreign trade is set to grow 20 percent in the first quarter of this year to around 750 billion yuan.

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Donald Trump’s stunning policy reversal on China’s currency

Donald Trump’s stunning policy reversal on China’scurrency this week shone a light on theadministration’s contradictory views on foreignexchange, and risks expos

ing the president to apolitical backlash over abandoned campaignpromises, analysts say.

The president on Thursday backed away from hissignature vow to brand China a currencymanipulator, executing a U-turn from one of hismost attention-grabbing 

campaign pledges.

It was one of a number of volte-faces this week,including a declaration that Nato is no longer “obsolete” and warmer words for Janet Yellen,the Federal Reserve chair, 

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Leaders of IMF and World Bank defend globalization

World finance leaders on Thursday defended globalization against an assault from President Donald Trump and European populists. They argued that blocking free trade would hobble economic growth instead of saving jobs from foreign competition.

World Bank President Jim Yong Kim told journalists that freer trade and more openness were “critical for the future of the world.”

Christine Lagarde, the managing director of the International Monetary Fund, said that the answer to the wave of populism gaining support in many countries was to work for “more growth and better growth” in the world economy.

Lagarde and Kim spoke at the opening of three days of discussions among global finance leaders representing the 189 countries that are members of the IMF and its sister lending organization, the World Bank.

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Canadian Retail Sales Likely to have dropped Sequentially in February, says Td Economics

The Canadian retail sales is likely to have eased in February, following a growth in January. According to a TD Economics research report, total retail sales are expected to have fallen 0.4 percent sequentially, whereas excluding auto it is likely to have dropped 0.5 percent month-on-month. Subdued prices for gasoline might be a considerable headwind for nominal consumer spending, whereas a wider drop in seasonally adjusted consumer prices might result in a moderate outperformance in volumes. In January, retail sales had expanded 2.2 percent sequentially, whereas ex-auto sales had risen 1.7 percent.

In spite of the 3.8 percent rise in motor vehicle sales last month, a pullback is unlikely. Meanwhile, industry reports indicate towards a moderate growth that might lead to a new monthly record. A surge in home sales might stimulate demand for furnishings and furniture. Outside these industries, a more disappointing performance is expected, but might downplay any adverse implications for the Canadian central bank amid increased worries regarding imbalances and a desire to witness a more balanced growth profile, noted TD Economics.

Moreover, the Bank of Canada is not expected to be greatly concerned with a moderate slowdown in February because of the real retail sales strength last month, which might be a mainstay for the quarter, added TD Economics.

The material has been provided by InstaForex Company – www.instaforex.com

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U.s. Q1 Real Gdp Growth Likely to have Come Below Trend Rate, says Td Economics

The U.S. real GDP advance data for the first quarter of 2017 is expected to affirm a deceleration of the economic growth to a below-trend pace. According to market consensus, the U.S. economy is likely to have expanded 1.2 percent in the March quarter. However, according to a TD Economics research report, the U.S. economy is likely to have expanded 0.6 percent in the quarter, suggesting a drag from a drawdown in inventory.

Real consumer spending might sharply decelerate to a pace below 1 percent, owing to a reduced spending on motor vehicles and a warmer winter that impeded spending on energy. However, with the strong incomes, sustained growth in job and declining slack, the U.S. economy is expected to recovery healthily in the June quarter, according to TD Economics.

Meanwhile, business investment is likely to show a rebound in both machinery and equipment and structures expenditure. These two important categories have recorded protracted weakness since the oil shock, stated TD Economics. Residential investment is also expected to strongly add to the economic growth.

However, the headline real GDP growth reading might be in stark contrast to the comparatively bullish survey data. The U.S. Fed is expected to look through the below-trend first quarter growth given the strong labor market conditions, added TD Economics.

The material has been provided by InstaForex Company – www.instaforex.com

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China’s Real Gdp Growth Likely to Decelerate Further on Ongoing Structural Economic Transition

The Chinese economy began 2017 with strong momentum as implied by recent high-frequency indicators from the services sector and the industrial sector. But the authorities have stressed financial stability in the rapid economic growth and cut this year’s real GDP growth target slightly to about 6.5 percent from 2016’s projection of 6.5-7 percent.

Policymakers stated that increased focus will be on deleveraging and managing financial risks connected to non-performing assets and high corporate level, shadow banking, bond details and the heated real estate market. The real GDP growth of China is expected to continue slowing down gradually due to the ongoing structural economic transition.

“We expect the nation’s output gains to slow toward 6 percent y/y in 2018”, said Scotiabank.

In spite of the slowdown, the growth of about 6 percent is significant and will continue to increase the nation’s economic importance globally. China’s government will carry on with its huge fiscal injections in infrastructure, while the overall activity will be greatly driven by China’s consumer and the services sector. Consumer spending is underpinned by swiftly rising incomes. The number of upper middle-class and the affluent households is likely to reach 100 million by the end of the decade.

Irrespective of China’s gradual structural change and the rise of the consumer, the external sector continues to be greatly pertinent as China’s exports are equivalent to nearly 20 percent of GDP. The U.S. is China’s key trading partner. China ships one fifth of its exports to the U.S. Thus, any changes in trade policy towards increased protectionism in the U.S. such as high tariffs on Chinese goods exported to the U.S. will have a negative effect on China’s economic performance.

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Australian Economy to Grow in Line With Potential Pace of 2.5 Pct Y/y in 2017-2018 – Scotiabank

The Australian economy is expected to continue being a strong performer amongst its peers of advanced economy through next year. However, the economy faces some challenges. For the whole of 2016, Australia’s real GDP grew 2.5 percent. The economy recovered in the fourth quarter of 2016 from the slump witnessed in the prior quarter.

“We estimate that the Australian economy will continue to expand in line with its potential growth rate of around 2½ percent y/y in 2017–18”, noted Scotiabank in a research report.

The near-term prospects for the Australian economy are favourable; however, the momentum is partly underpinned by transitory factors in the external sector. The nation’s mining boom has shifted to a production phase from an investment phase. Thus, higher volumes of exports are giving a temporary stimulus to the economy.

A rebound in prices of commodity from the levels seen a year ago is raising the nation’s terms of trade, supporting corporate profits and output growth. But the medium-term pricing environment for iron ore, LNG and metallurgical coal is not expected to improve, noted Scotiabank. Exporters in Australia are advancing from the recent stability in the Chinese economy, which is a destination for nearly 30 percent of Australia’s exports. However, the Australian exporters continue to be vulnerable to the inevitable deceleration in China’s commodity import demand in the medium-term.

The growth of the external sector has a crucial role in smoothing out the Australian economy’s continuous rebalancing toward non-mining-based activity. In the quarters ahead, the external sector’s contribution to the economic growth will diminish and the nation’s long-term outlook would greatly be dependent on the strength of consumer spending and non-mining investment, stated Scotiabank.

“We expect a pick-up in non-mining investment over the coming quarters, which reflects higher residential construction activity and public infrastructure outlays”, added Scotiabank.

The material has been provided by InstaForex Company – www.instaforex.com

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Euro Area Inflation Likely to Move Back Close to Target Rate, ECB Unlikely to Make Policy Changes in April

Data earlier this week showed that euro area’s headline and HICP inflation in March decelerated to 1.5 percent and 0.7 percent respectively from 2 percent and 0.9 percent in February. Even if there was a slight bounce in core inflation in April, the overall scenario for the core inflation continues to be weak. It is expected to average 1 percent in 2017 as labor market slack in the eurozone keeps domestic prices pressures under control, noted Barclays in a research report. The headline figure is likely to stay quite volatile due to the persistent unprocessed food inflation correction, swings in the energy base effect contribution, calendar effects and commodity prices.

“With all of these factors, we expect the headline HICP inflation to move back close to the ECB's 2% target for April, supported by volatile core services and energy prices, before slowing down gradually”, noted Barclays.

Some of these effects might wane after the summer and the headline figure is expected to gradually decelerate and remain lower than 1.5 percent in 2018. Given the weak outlook for medium-term inflation, the ECB is unlikely to make any policy change during its meeting next week. This is mainly because the French presidential election will continue to be a critical risk for the currency bloc. This is likely to be resolved only in the second round on 7 May.

In any event, the ECB is expected to announce forward guidance during its June meeting and is likely to be less dovish that would open the door for depo rate hikes next year. In the beginning of 2018, the ECB is expected to reduce the monthly QE purchases to EUR 35-40 billion in the first half of 2018 and to EUR 15-20 in the second half.

“We also expect two 10bp hikes in the deposit rate, in Q2 18 and Q4 18, respectively. In other words, we expect both QE and negative deposit rates to still be in place in H2 2018, even if at less accommodative levels than in 2017”, added Barclays.

The material has been provided by InstaForex Company – www.instaforex.com

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Americas Roundup: Euro Dips With French Election in Focus, Dollar Firms, US Stocks Dip, Oil Falls, U.s. Crude Below $50 for

Market Roundup

•    Odoxa poll after Paris attack: Macron on 24.5%, Le Pen 23%, Fillon, Melenchon both 19% in the 1st round.

•    Trump says he will unveil tax plan next week that includes “massive” tax cut for individuals and businesses – AP.
  
•    French yields hit 3-month lows as investors focus on final polls.

•    Euro now at “acceptable” level, no longer needs to “devalue” -Melenchon spokesman.

•    France election poses risk to world economy-Schaeuble.

•    U.S. March existing home sales 5.71 mln vs consensus 5.60 mln, Feb 5.47 mln-NAR.

•    Markit US. Manufacturing PMI at lowest since September.

•    Markit U.S. Manufacturing flash April PMI 52.8 vs consensus 53.5, final March 53.3.

•    Markit U.S. services April flash PMI 52.5 vs consensus 53.0, final march 52.8.

•    Markit composite employment index at lowest since February 2010.

•    Growth improving but ECB accommodation still needed: Draghi.   

•    China central bank has set no limits on yuan outflows.

•    Bank of England's Saunders edges towards rate rise-Reuters News.

•    Canada inflation rate cools in March as food prices drop.

•    Canada CPI +0.2% m/m, +1.6% y/y vs consensus +0.4% and +1.8%.

•    China's rising debt poses the biggest risk to the economy – former finance minister.

Looking Ahead – Economic Data (GMT)

•    No significant data
  
Looking Ahead – Events, Other Releases (GMT)
 
•    No significant events

Currency Summaries

EUR/USD is likely to find support at 1.0650 levels and currently trading at 1.0707 levels. The pair has made session high at 1.0709 and hit lows at 1.0682 levels. The euro declined against the dollar on Friday as investors braced for Sunday's first round of a tight French presidential election. The market is eager to know the outcome of the first round of the French presidential election on Sunday. Opinion polls suggest that France’s election will likely come down to a second-round duel between independent centrist Emmanuel Macron and Marine Le Pen, head of the anti-European Union and anti-immigrant National Front. On the data front, U.S. home resales rose more than expected in March to the highest level in more than a decade as more homes came on the market and were quickly snapped up by consumers. The National Association of Realtors said on Friday that existing home sales increased 4.4 percent to a seasonally adjusted annual rate of 5.71 million units last month. The euro was down 0.2 percent against the dollar at $1.0693, close to the session's low. The dollar index, which tracks the U.S. currency against a basket of six major rivals, was up 0.18 percent at 99.954.

GBP/USD is supported in the range of 1.2749 levels and currently trading at 1.2799 levels. It reached session high at 1.2802 and dropped to session low at 1.2763 levels. British pound declined against the dollar on Friday as sterling was dragged down after weaker-than- expected UK retail sales, but it stayed on track for its strongest week since November after British Prime Minister Theresa May's decision this week to call an early general election. The pound lost some of that sheen on Friday, after the biggest quarterly fall in retail sales in seven years. That added to signs the vote last year to quit the EU and the price rises spurred by the currency's resulting slide are finally putting pressure on consumers. Retail sales volumes contracted 1.4 percent in the first quarter following a 0.8 percent rise in the last three months of 2016, the Office for National Statistics said on Friday. The pound was 0.3 percent lower at $1.2770 by 1546 GMT, having risen to as high as $1.2908 on Tuesday.

USD/CAD is supported at 1.3450 levels and is trading at 1.3500 levels. It has made session high at 1.3524 and lows at 1.3484 levels. The Canadian dollar declined against its U.S. counterpart on Friday, as the Lonnie was pressured fall in oil prices and as cooler-than-expected Canadian inflation data. Canada's annual inflation rate cooled more than expected in March, pulling away from the central bank's target as food prices dropped for the sixth month in a row, underscoring expectations interest rates will stay put for some time. The annual rate fell to 1.6 percent from the previous month's 2.0 percent, exceeding economists' forecasts for a decline to 1.8 percent. The three measures of core inflation put in place by the Bank of Canada last year remained tame. Oil prices tumbled more than 2 percent on Friday, on track for the biggest weekly drop in a month, on renewed concerns that increasing U.S. production and high inventories will thwart OPEC's attempts to reduce the global crude glut. The Canadian dollar was last trading at C$1.3495 to the greenback, or 74.12 U.S. cents, weaker than Thursday's close of C$1.3472, or 74.31 U.S. cents.

AUD/USD is supported around 0.7521 levels and currently trading at 0.7538 levels. It hit session high at 0.7545 and made session lows at 0.7519 levels. Australian dollar trod water against US dollar on Friday as investors shifted focus to this weekend's first round of voting in the French presidential election. With millions of French voters still undecided or planning to abstain, the vote is the most unpredictable in France in decades and investors are nervous about potential last-minute surprises that could trigger market turmoil. Opinion polls suggest that the election in the second-biggest euro zone country will likely come down to a duel in the final between independent centrist Emmanuel Macron and Marine Le Pen, head of the anti-European Union and anti-immigrant National Front. The Australian dollar held at $0.7536 after gaining 0.4 percent in the previous session. For the week, it is down 0.7 percent. The dollar, which has been pressured lately by weaker-than-expected economic data and worries about the Trump administration's ability to pass tax and fiscal stimulus legislation, rose on Friday as traders squared up positions ahead of the weekend.

Equities Recap

European shares advanced on Friday, though France's benchmark CAC 40 declined slightly ahead of the first round of voting in the French presidential election.

The UK's benchmark FTSE 100 closed up by 0.05 percent, FTSEurofirst 300 ended the day up by 0.13 percent, Germany's Dax ended up 0.3, and France’s CAC finished the day down by 0.3 percent.

U.S. stocks dipped on Friday as investors were cautious ahead of the first round of the closely contested French presidential election, but the S&P 500 managed to notch its first weekly gain in three.

Dow Jones closed down by 0.14percent, S&P 500 ended down 0.29 percent, Nasdaq finished the day down by 0.10 percent.

Treasuries Recap 

U.S. Treasury debt prices gained on Friday ahead of Sunday’s presidential election in France, with no major U.S. economic releases due to set market direction.

Ten-year notes gained 4/32 in price to yield 2.23 percent. The 10-year yield briefly dipped to 2.165 percent on Tuesday, the lowest since Nov. 10, and has tumbled from 2.63 percent on March 14.

Commodities Recap

Gold prices rose slightly on Friday as investors awaited the first-round of voting in the presidential French election at the weekend and possible announcements about tax changes in the United States.

Spot gold was up 0.3 percent at $1,284.62 an ounce by 2:30 p.m. EDT (1830 GMT), on track to close the week little changed after five straight weeks higher. U.S. gold futures settled up 0.4 percent at $1,289.10.

Oil prices tumbled more than 2 percent on Friday, on track for the biggest weekly drop in a month, on renewed concerns that increasing U.S. production and high inventories will thwart OPEC's attempts to reduce the global crude glut.
​
U.S. crude futures were at $49.45 a barrel, down 2.5 percent, or $1.26 as of 1:52 p.m. EDT (1752 GMT), on course for the biggest weekly decline since the week ended March 10. Brent futures were at $51.83 a barrel, down $1.16, or 2.2 percent.
 

The material has been provided by InstaForex Company – www.instaforex.com

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