Monday 9th June 2008
Oil price conitnues to strengthen
Global equity markets succumbed to a new sell-off at the end of last week amid jitters among investors over key economic releases and further oil price rises. The US Labour Department on Friday reported a 0.5% increase in the unemployed American workforce (non Farm payroll) for last month, equating to 49,000 people losing their jobs. This increase in the unemployment level was last seen in February 1986 and a level last encountered in October 2004.
Morgan Stanley (MS) issued a statement forecasting oil prices to breach the $150/barrel mark by July 4, this sent light sweet oil prices to $139 at the end of last week. MS believe investors will continue to buy oil to hedge themselves against the foreseeable depreciation of the US dollar. The question is, how much this hedging is pushing the market against speculators pushing this oil price higher?
Closer to home the Bank of England is set to name its chief economist Charles Bean as deputy governor after a long standing dispute between the BOE and the Treasury. This appears to be good news for Mr King as Mr Bean is his preferred choice of the two candidates.
In Europe it is well known that European central bankers have tended to follow the US Federal Reserve actions. However, comments made by Jean-Claude Trichet, ECB president indicated a misalignment in their interests. Trichet signalled the ECB’s intentions to take a hawkish stance, by last week stating it was preparing to raise interest rates by 0.25% in July to curb the ever growing inflationary pressures within the Eurozone. Trichet’s statement was soon followed by a 1.3% appreciation in the euro to 1.5749 €/$.
Sticking with currencies Sterling fell against the euro this morning which is the fourth consecutive day, dropping to £0.8014/euro. Against the dollar, it dropped to $1.9685, from $1.9708.
Key Economic Data Releases This Week
Monday: UK PPI (0930)
US Pending Home Sales (1500)
Tuesday: UK RIC’s May House Prices (0001)
UK DCLG April House Prices (0930)
Bank of Canada rate announcement (1400)
Wednesday: UK Unemployment (0930)
US Fed Reserve’s Beige Book (1900)
Thursday: US Retail Sales (1330)
Friday: US CPI (1330)
US University of Michigan Confidence (1500)
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