Shock from Doha Fades, Dow Closes Higher

Daily Analysis - 19/04/2016

Despite Failed Doha Talks, Dow Moves Higher


Despite starting off on a risk aversion mode after oil prices fell to session lows of $37.59 which saw the yen and gold rise briefly, the markets soon recovered as US equity markets closed the day with modest gains, while the safe haven assets gave way to a risk-on sentiment. The Dow Jones Industrials passed 18,000 yesterday for the first time this year since July 2015, closing at 18,004.16.

Bundesbank: German Growth to Slow in Q2, 2016

The German central bank in its monthly report noted that the German economy got off to a solid start this year in the first quarter with private consumption and rising household spending emerging as key driving forces in the first three months of the year. The Bundesbank said that the pace of growth in the first quarter could be considerably above the central bank's forecasted growth rates and solidly above previous quarters. However, in its forward guidance, the Bundesbank sounded cautious noting that while the first quarter domestic consumption supported the economy to offset the weak demand from emerging markets and China, it expects a slower pace of growth with a slump in industrial orders and a downbeat mood among businesses. German ZEW economic sentiment data is expected to be released today with forecasts of an increase to 8.2 from 4.3 in March.


BoJ’s Kuroda: Yen’s Appreciation Threatens Inflation

Speaking in an interview with the Wall Street Journal, Bank of Japan governor Haruhiko Kuroda said that the yen's excessive appreciation in recent months could undermine the central bank's efforts to raise inflation to the 2.0% target rate and could force the Bank of Japan to unleash additional stimulus measures. The comments came on the sidelines of the weekend's IMF meeting in Washington. The BoJ governor however quickly added that the central bank's monetary policy was not to target the exchange rate but that the central bank was monitoring the rate movements. He said that the BoJ will not hesitate to take further easing measures if it felt that the growth of inflation was threatened. The Bank of Japan will be meeting on April 27, 28th.


US Homebuilder Confidence Flat in April

Homebuilder confidence in the US was flat in April for the second consecutive month according to data released by the National Association of Home Builders on Monday. The NAHB market index came in at 58 in April, the same as in March, missing forecasts of an increase to 59. NAHB chief economist Robert Dietz said that builders remain cautiously optimistic on construction growth in 2016. The NAHB report also showed that expectations for sales in the next six months increased to 62 rising from 61. The US Department of Commerce will be releasing a separate report today on building permits which are expected to have risen 2.0% from February while it is expected that housing starts slipped 0.70% in March, following 5.20% gains in February.


RBA Minutes Reveal that Further Rate Cuts on the Table

The minutes from the RBA's recently concluded monetary policy meeting in April were released today. They showed that the RBA felt it had room to cut rates further as inflation remains subdued and could remain low into the coming two years. The central bank said that the appreciating exchange rate of the AUD would complicate things for the economy amid its current rebalancing from the end of the boom in mining investment. On the labor market, the RBA said that the low growth of wages was apparent but on the other hand, lower wages were lowering the unemployment rate, giving business an incentive to increase hiring.


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