Brazil Cuts Rates by 25 bps
The central bank of Brazil lowered its key Selic rate by 25 bps to 10.5% in its May meeting, as widely expected. The Committee unanimously assesses that the uncertain global scenario and the domestic scenario marked by resilient activity and unanchored expectations demand greater caution. They mentioned the evolution of the disinflation process, the scenarios evaluated, the balance of risks and the wide range of information available.
Domestically, economic activity and labor market indicators have shown greater dynamism than expected. Headline consumer inflation maintained a disinflation trajectory, while underlying inflation measures were above the inflation target in the most recent releases. Copom's inflation projections in its reference scenario* are 3.8% in 2024 and 3.3% in 2025. Policymakers also emphasized that the extent and adequacy of future interest rate adjustments will be dictated by the firm commitment to convergence of inflation to the target.
FX Updates: South Korean Won Depreciates by 0.54%
Top currency losers are South Korean Won (-0.54%), Japanese Yen (-0.50%) and Brazilian Real (-0.27%). Gains are led by Polish Zloty (0.26%). In addition, there was a slight change on Dollar Index (0.08%) and British Pound (-0.04%).
Energy Commodities Updates: Ethanol Rises by 1.69%
Top commodity gainers are Ethanol (1.69%), Crude Oil WTI (1.03%) and Heating Oil (0.94%). Biggest losers are Natural gas (-1.54%). In addition, there was a slight change on Brent Crude Oil (0.69%).
Metals Commodities Updates: Copper Drops by 1.04%
Top commodity losers are Copper (-1.04%) and Steel Rebar (-0.99%). In addition, there was a slight change on Gold (-0.22%).
Agricultural Commodities Updates: Corn Drops by 4.76%
Top commodity losers are Corn (-4.76%) and Cheese (-4.28%). Gains are led by Cotton (3.18%) and Butter (1.87%).
Crypto currencies falling on Wednesday
Bitcoin and Ether are experiencing declines. Bitcoin has slipped 2.02%.
Downbeat Momentum in NZX 50 Persists
The stock market in New Zealand was down 39 points or 0.3% to11,744 on Thursday morning trade, falling for the fourth straight session as several major sectors retreated, particularly financials, non-energy minerals, industrials, and consumer services. The NZX 50 lingered at its lowest level in over 7 weeks amid a mixed picture on US futures.
South Korea Posts Current Account Surplus for 11th Month
South Korea posted a current account surplus of $6.93 billion in March 2024, up from a surplus of $6.93 billion in a month earlier. It marked the 11th straight month of logging a surplus amid increased trade surplus and dividend income. The goods account recorded an 8.09 billion dollar surplus as exports increased annually by 3% to 58.27 billion dollars and as imports decreased by 13.1% to 50.18 billion dollars, both compared to one year earlier. The services account posted a 2.43 billion dollar deficit owing to deficits in the use of intellectual property and travel accounts. The primary income account recorded a 1.83 billion dollar surplus due to an increase in the income on equity. The secondary income account recorded a 0.56 billion dollar deficit.
UK House Price Indicator Unchanged in April
The RICS UK Residential Market Survey house price balance, which measures the gap between the percentage of respondents seeing rises and falls in house prices, remained unchanged at -5% in April 2024. The latest reading signaled a largely stable trend in house prices at the aggregate level, but missed forecasts for an improvement to -2%. Virtually all parts of England returned either a flat or marginally negative reading for the house price series. By way of contrast, both Northern Ireland and Scotland continue to see an upward trend in house prices. Looking ahead, the three-month outlook for house prices slipped to -13%, while the twelve-month outlook remain consistent with house prices returning to growth at the aggregate level, posting a net balance of 38%. When broken down, all parts of the UK are anticipated to see some uplift in house prices over the coming year.
Japan Nominal Wages Rise 0.6% in March
Average cash earnings in Japan increased by 0.6% year-on-year in March 2024, slowing for the second straight month following a 1.8% gain in February. The latest reading was also the lowest since September last year. Moreover, the country’s nominal wage growth lagged behind the 2.6% core consumer inflation rate in March, marking two straight years of negative inflation-adjusted real wages which fell 2.5% last month. The following industries contributed the most to the wage rise: finance
BOJ Flags Inflation Risks, But Easy Policy Likely Stays
The Bank of Japan said the economy is expected to grow above potential growth rate as a virtuous cycle from income to spending intensifies, according to the summary of opinions during its April monetary policy meeting. The central bank also flagged upside risks to inflation, prompting attention to various inflationary factors such as greater-than-expected progress in the wage-price spiral, a further depreciation of the yen, active fiscal policy, lack of supply capacity that is mainly due to labor shortages and a rise in commodity prices. Moreover, the BOJ stated that if the economy runs hot and inflation accelerates, it will adjust monetary policy, but the base case is that accommodative financial conditions will be maintained for the time being. Meanwhile, a Ministry of Finance representative flagged the lack of momentum in consumption, and called on the BOJ to work closely with the government to achieve sustainable 2% inflation.
Gold Steady Ahead of US Economic Data
Gold prices held around $2,310 per ounce on Thursday, as investors awaited US economic data to seek hints on potential timing for Federal Reserve’s rate cuts. The US is slated to release its weekly jobless claims due later in the day, and the University of Michigan's consumer sentiment reading on Friday. Investors also continued to assess several signals from Fed officials. On Wednesday, Fed Bank of Boston President Susan Collins emphasized the necessity for the US economy to cool down to reach the central bank's 2% inflation target. Markets now show a 66% chance of a rate cut in September, per CME's FedWatch Tool. Lower rates increase the appeal of holding non-yielding bullion. Meanwhile, Hamas stated on Wednesday that it was unwilling to offer further concessions to Israel in ceasefire negotiations for Gaza despite ongoing talks in Cairo aimed at halting Israel's seven-month offensive.
Oil Gains as US Crude Stocks Decline
WTI crude futures rose above $79 per barrel on Thursday, extending gains from the previous session as official data showed a decline in US crude stockpiles, signaling tighter supply. EIA data showed that US crude inventories fell by 1.361 million barrels last week, reversing from a 7.265 million barrel jump in the preceding period as refinery activity increased. The outlook for energy demand was also lifted by growing expectations that the US Federal Reserve will cut interest rates in the second half of this year. Still, oil prices remained close to two-month lows as geopolitical tensions eased in the Middle East after Israel and Iran managed to avoid a wider conflict and hopes for a ceasefire in Gaza grew. The outlook for OPEC production policy also remains highly uncertain ahead of the group’s policy meeting on June 1.
China Stocks Gain After Trade Data
The Shanghai Composite rose 0.8% to above 3,150 while the Shenzhen Component gained 1.4% to 9,775 on Thursday, with mainland stocks hitting fresh multi-month highs as investors reacted to Chinese trade figures for April. Data showed that Chinese imports jumped 8.4% in April from a year ago, exceeding forecasts of 5.4%. Exports also increased 1.5%, above the 1% gain expected by analysts. The latest figures came as a welcome surprise amid growing fears that the US could impose more tariffs on Chinese goods. Notable gains were seen from heavyweight firms such as Contemporary Amperex (3.1%), Beijing Easpring (11.7%), Cosco Shipping (7%), Wuxi Apptec (2%) and Citic Offshore (1.8%). In corporate news, Longi Green Energy jumped 3% following reports that Chairman Zhong Baoshen raised his stake in the solar modules producer by 1.3 million shares.
Palm Oil Extends Losses
Malaysian palm oil futures traded below MYR 3,870 per tonne, falling for the second straight session amid weakness in rival edible oils and growing caution ahead of April's palm oil data in the following days. Reuters estimated that Malaysia's shipments of palm oil products were down 7.79% from the prior month to 1.22 million tons in April. Limiting the decline were trade data from key buyer China that showed exports and imports grew more than expected in April. Meantime, crude oil prices rose further due to a decrease in US crude stockpiles. Turning to top importer India, palm oil purchases surged 41% last month to their highest figure in three months as price moderation encouraged refiners to increase their buying. Meanwhile, Malaysia reportedly plans to launch "orangutan diplomacy" in its relations with palm oil-importing countries, offering the animals as trading gifts to ease concerns over the environmental effects of growing the commodity.
BoE To Offer Clues on Rate Cuts
The Bank of England is likely to maintain the key bank rate at 5.25% during its May 2024 meeting, staying at levels not seen since 2008. However, investors are anticipating more clarity on when interest rates might be lowered, with expectations currently favoring either June or, more likely, August. The focus will be on the closely monitored vote tally, currently seen at 8-1, and the release of new economic projections, with the central bank set to upgrade its growth projections. In March, UK inflation dropped to 3.2%, significantly lower than the 10.1% recorded in March 2023, though it exceeded the central bank's projections.