S&P 500 Index Erases February Losses

Daily Analysis - 21/03/2016

S&P 500 Erases February Losses, Moves to Risk-On

US equity markets closed for the fifth consecutive week with gains, erasing February losses. The turnaround in risk sentiment came as the Federal Reserve signaled a slower pace of rate hikes in 2016 and could likely spark a continuation of the risk-on mode.

New Zealand Consumer Confidence Declines

New Zealand consumer confidence fell to 118.0 in March, down from 119.7 a month ago, according to ANZ (The Australia and New Zealand Banking Group). Consumer optimism regarding the short term economic outlook slipped to a five month low while the current conditions index fell to 120.8 in March. The lower optimism among consumers comes on the background of declines in global dairy trade and an increase in oil prices in New Zealand. In a separate report, New Zealand's job advertisements managed to grow at a moderate pace in February, recovering from the sharp declines in January. Job ads were up 0.90% in February on a seasonally adjusted basis, following -2.90% declines in January. Headwinds including the higher exchange rate and falling commodity prices continue to put pressure on the country’s economic momentum.

Canada's Retail Sales Beat Expectations

Retail sales for the month of January surged 2.10% beating estimates by a strong margin according to data released by Statistics Canada on Friday. The market consensus was expecting to see a modest gain of 0.60% for the month. Core retail sales, excluding automobile and volatile components, also gained 1.20%, beating the forecasts of 0.40%. Auto and parts sales were the biggest contributor to retail sales, a theme that was seen playing out for most of the economic data from Canada last week. However, inflation data remained subdued. While the Bank of Canada's Core CPI fell to 1.90%, the headline CPI, measured on a month over month, basis fell to a non-seasonally adjusted 0.20%, less than the expected 0.40%.

Euro Falls on Praet's Comments

EURUSD which closed the week with strong gains turned slightly weaker into Friday's session. The Euro slipped in Friday's trading, closing at $1.1272 as the ECB's chief economist Peter Praet said that fresh rate cuts were still on the table. At the ECB's meeting on March 10th, Mario Draghi surprised investors by saying that he didn't expect to cut rates again after bringing the ECB's minimum bid rate to zero percent and the deposit rate to -0.4%. The comments sparked a rally in the Euro at the time. In an interview published on the ECB's website, Mr. Praet was quoted as saying "we have not reached the physical lower bound". The comments from the ECB's economist comes in a week where the US Federal Reserve left interest rates unchanged and signaled a slower pace of rate hikes. EURUSD briefly tested the highs above $1.13 for the second day in a row before closing lower for the day.

Gold Consolidates Near $1,250 Following FOMC Meet

Gold prices which have rallied strongly since last December to test the highs above the $1,250 failed to capitalize on the gains this week despite the dovish FOMC meeting. By Friday's close, gold prices slipped to close at $1,255 an ounce after a brief intraday test to the highs of $1,266. Gold prices trimmed the earlier gains to close out the week with 0.38% gains. Prices of the precious metal spiked amid global uncertainty surrounding central banks’ interest rate policies and rising speculation of negative interest rates which sent the zero-yielding asset to new highs this year.