World markets diverge on better than expected indicators - 25.3.2015

US stocks fell for the second consecutive day on Tuesday as better than expected economic statistics pointed to increased likelihood of interest rate hike. The US consumer-price index rose a 0.2% in February. CPI recorded the first monthly increase since October as rebounding gasoline prices and rising cost of food and shelter pushed consumer prices higher. Core CPI increased 0.2% for the second consecutive month versus expected increase of 0.1%. New home sales increased 7.8% in February to 539,000 to mark the best month of sales in seven years. US house prices rose 0.3% in January as indicated by the Federal Housing Finance Agency Housing Price Index. And Markit's Manufacturing PMI unexpectedly rose in March to 55.3 from 55.1 in February, recording the highest reading since October. Investors are concerned that improving economic indicators will prompt the Fed to increase the borrowing costs sooner rather than later as policy makers indicated last Wednesday they would be making decisions based on future performance of US economy. The dollar advanced with the ICE US Dollar Index, a measure of the dollar’s strength against a basket of six currencies, gaining 0.1% to 97.1890. Today at 13:30 CET the February Durable Goods Orders will be released. The tentative outlook is positive.

European stocks rose after better than expected business surveys from Germany and France indicated euro-zone economy is on track to recovery and euro’s slide against the dollar resumed. The Stoxx Europe 600 added 0.3%. Markit’s Composite PMI for euro-zone, a gauge of both the manufacturing and services sectors, rose to 54.1 in March, a 46-month high. Germany's DAX 30, which is up about 20 percent since the start of the year, rose 0.9 percent. European equities have rallied since the start of the stimulus program of the European Central Bank to buy 60 billion euros a month in government debt and other assets, which drives euro lower, making goods of European exporters cheaper for overseas consumers. Also, lower yields on bonds make equities more attractive for investment and part of the additional liquidity ECB pumps into the economy ends up in stock markets, pushing equities higher. Today at 10:00 CET March Ifo Business Climate Index will be released in Germany. The tentative outlook is positive.

Nikkei edged up today as investors purchased stocks before they go ex-dividend later this week. Nikkei has added 13 percent since the start of this year as Bank of Japan’s monetary stimulus program has weakened yen and helped boost the revenues of Japan’s export oriented economy.

Oil prices diverged on Tuesday as West Texas Intermediate crude oil for delivery in May inched higher 0.1% on Nymex while May Brent crude on London’s ICE Futures exchange fell 1.5%. The Brent-WTI spread is at $7.72 a barrel. Investors are closely watching the Iranian nuclear deal negotiations, as resumption of oil exports from Iran may further add to the global oversupply of around 1.5 million barrels a day. Today at 15:30 CET Crude Oil Inventories for the week ended March 20 will be released by the Energy Information Administration, further build-up of inventories is expected.

Gold prices rose the fifth straight session on Tuesday.

Sugar prices are falling as world market is expected to see a fifth consecutive market surplus for the 2014-2015 crop year. They have fallen more than 85% over the past 5 years.