Originally published by Rivkin Securities
US stock indices managed to limp higher overnight although they closed only barely up. US producer price index data showed that producer prices rose 0.2% for the month of August. This is lower than the 0.3% expected but significantly better than the 0.1% decline from July. This data is seen as a leading indicator of inflation as producer prices feed their way into the rest of the economy.
The official Department of Energy oil data mostly confirmed yesterday’s API data which showed a large crude build and but an even larger gasoline draw. In fact, the drawdown in gasoline stocks was the largest on record as a result of refinery disruptions due to hurricane Harvey. Further bullish news for crude came from OPEC and the International Energy Agency (IEA) which both upgraded their crude demand forecasts for the next couple of years. Furthermore, the disruption from the hurricane caused a large drop in US crude production which has so far only recovered around 75% of the initial fall.
Today we get Australian employment data which is expected to show 17,500 new jobs created with a steady unemployment rate of 5.6%. Australia’s employment data has been relatively strong over the last six months with approximately 164,000 jobs created over this time. This data brings into question the need for record low interest rates and as a result the Reserve Bank of Australia (RBA) will be paying close attention to the latest data release. Higher than forecast employment growth would put additional pressure on the RBA to raise rates and may fuel further increases in the AUD/USD exchange rate.
Chinese industrial production data will also be released which gives an insight into the health of the Chinese economy. As a manufacturing/producing economy, industrial production is an important bellwether for the economy. As a major trading partner to Australia, the health of the Chinese economy is critical to Australia’s balance of trade.
The Bank of England will decide interest rates later today although expectations are that they leave rates at the record low of 0.25%. Having said this, the number of bank members voting for an interest rate hike is expected to be two out of the nine which is indicating that the shift towards a hiking cycle may not be too far off. With the Bank of Canada recently hiking rates, it is beginning to feel that global interest rates have now bottomed.
Data Releases:
- Australia Employment Data 11:30am AEST
- China Industrial Production 12:00pm AEST
- China Retail Sales 12:00pm AEST
- England Cash Rate 9:00pm AEST
- US CPI 10:30pm AEST