Another huge session for crude oil overnight with WTI and Brent front-month futures surging 5%. From their recent lows both have now put on in excess of 21% with the former, almost unbelievably, turning from a bear market into a bull market in the space of just three short days. Having been dragged lower alongside crude copper prices also popped with the spot price jumping nearly 4%.
US factory orders fell for a fifth-consecutive month in December with a contraction of 3.4% reported. The reading, below the downwardly-revised 1.7% fall of November and expectations for a contraction of 2.2%, was the largest month-on-month decline since August 2014. Broad-based weakness was evident across the survey with core orders, that which excludes transportation items, falling by 2.3% while those excluding military orders slipped by 3.2%.
Business conditions across New York City deteriorated sharply in January with the ISM New York index plummeting to 44.5. The reading, the first deterioration since June 2013 and lowest level seen in six years, came only one month after the index hit an all-time high of 70.8. Mirroring the decline in current conditions the surveys six-month outlook gauge also deteriorated, falling to 66.9 from 72.9 in December.
James Bullard, St Louis Fed President, and Narayana Kocherlakota, Minneapolis Fed president both spoke overnight. The former, representing the policy hawks, suggested the FOMC should begin normalising policy within the next few meetings while the latter, representing the doves, stated that the committee should not move rates this year, even suggesting that they should consider restarting QE should inflation not turn up. Both are not voting FOMC members in 2015.
Canadian producer prices slumped 1.6% in December. The reading, below the 0.5% decline of November and expectations for a similar fall in December, was the steepest monthly contraction since December 2008. With the monthly gauge undershooting to the downside the annual rate slipped to -0.5% from 1.9% in November. Ex-energy prices actually increased 0.3% on month with the annual rate slowing to 3.3% from 3.5%.
Eurozone producer price deflation accelerated at a faster pace in December with a decline of 1.0% recorded. The reading, below the 0.3% contraction of November and expectations for a decline of 0.7%, left the annual rate at -2.7%, the lowest level recorded since December 2009. Yet again energy was the chief catalyst behind the decline, prices from a year earlier fell 8.3%, with prices ex-energy falling by a smaller 0.5%.
Italian consumer prices fell by 0.4% in January, the steepest month-on-month decline since November 2013, with the annual rate falling to -0.6%, the lowest level seen since at least 1997. Using EU-methodology the annual decline was not quite as steep, only -0.4%, although the reading was the lowest level seen in the history of the survey.
Growth in UK construction accelerated sharply in January after slowing in recent months with the Markit/CIPS construction PMI gauge rising to 59.1. The reading, higher than the 57.6 level of December and expectations for a fall to 57.0, was the first month since September than an increase had been reported. Growth in residential, commercial and civil engineering all accelerated during the month as the measure on new orders rose to a fresh three-month high.
The Day Ahead (AEDT)
The ASX 200 looks set to make it 10 gains in a row, and in spectacular fashion too, with SPI futures pointing to a rise of 97pts on the open. Gains are likely to be broad-based, gold producers maybe the exception, with energy and materials expected to outperform.
The AUDUSD has recovered all of its post RBA rate cut losses overnight, largely on the back of surging commodity prices and renewed US Dollar weakness, with the pair currently fetching .7800. Considering that there’s no tier-one data scheduled for release in Asia, and presuming that the strength in commodities is maintained, it’s likely that the pair will remain bid throughout today’s session. Support is found at .7720 with resistance kicking in at .7850, .7880 and again at .7900
Australia’s AIG performance of services index for January will be released at 9.30am this morning. Elsewhere in the region we’ll also receive services PMI gauges from China and India along with New Zealand Q4 labour costs.
Service-sector activity gauges continue to dominate this evening with figures from the US, Eurozone and UK all scheduled for release. Elsewhere markets will also have to digest the latest ADP national employment report and MBA mortgage market index from the States along with Eurozone retail sales.