Forex – The euro and yen weakened 1 percent against the dollar on Monday

FOREX

Forex – The euro and yen weakened 1 percent against the dollar on Monday, with investors reversing the past week's search for traditional safe locations for capital as officials signalled they could do even more to spur the global economy. With U.S. markets closed for a domestic holiday, Japanese Prime Minister Shinzo Abe led the way by warning Tokyo would take action against excessive currency volatility. His euro zone opposite number, Mario Draghi, knocked another half a percent off the euro and yen in afternoon trade, pointing to more steps the bank can take to support credit and get the economy moving again.

The yen and Swiss franc on Wednesday surrendered gains and turned lower as a rise in oil prices and a recovery in European stock markets and U.S. equity futures dimmed the appeal of these safe-haven currencies. Earlier, the yen had strengthened as Asian stock markets fell and oil prices slipped. The greenback also edged higher against the yen after a surprise rise of 0.1 percent in U.S. producer prices for January. Economists polled by Reuters had forecast the PPI dropping 0.2 percent last month and falling 0.6 percent from a year ago. U.S. housing starts, meanwhile, unexpectedly fell in January likely as bad weather disrupted building activity in some parts of the country. The markets, however, largely shrugged off this report. br />

The yen rose against the euro and dollar on Friday after yet another downbeat session for oil prices and stock markets worldwide, underscoring worries about global growth. The dollar, however, gained overall after higher than-expected U.S. inflation data for January helped keep interest rate hikes by the Federal Reserve a possibility this year. U.S. data this week has been generally positive, with the dollar index on track for its best weekly performance in about three months. However, the focus remained squarely on oil and equities, two assets that have struggled this year. The euro, on the other hand, slipped against the dollar, trading down 0.1 percent. It was on pace for its worst weekly loss since early November. Thursday's minutes of the European Central Bank's January meeting had the market again looking for more weakness in the euro against the dollar ahead of a March meeting now widely expected to deliver further policy easing.

INDICES

Indices - World stocks rose sharply on Monday as China's central bank fixed the Yuan at a much stronger rate and oil cemented recent gains, easing fears of global deflation. The rally belied a string of poor economic data from Beijing and Tokyo as demand for safe-haven assets waned, yet investors remained on edge due to lingering concerns about growth and the health of the financial sector. European stocks rose 3 percent, having shed nearly 10 percent over the last fortnight, mirroring a bounce in Asia. Futures pointed to notional gains of 1.6 percent on Wall Street, but U.S. markets were closed for a holiday. Meanwhile, assets that tend to perform well in times of stress lagged.

Global equity markets rallied on Wednesday, buoyed by a jump in oil prices on optimism that top crude producers could reach a deal to freeze production, while the Mexican peso surged after Mexico's central bank hiked its benchmark interest rate. After a surprise agreement deal between non-OPEC Russia and the group's leader Saudi Arabia to freeze output at January levels, Iran stopped short of offering to hold back output as it wants to recoup market share it lost during years of sanctions. Economic data showed U.S. housing starts unexpectedly fell in January but producer prices rose last month, with signs of an uptick in underlying inflation, which is closely watched for signs the Fed will raise rates. The Dow Jones industrial average rose 1.56 percent, the S&P 500 gained 1.67 percent and the Nasdaq Composite added 2.12 percent.

Global equity markets retreated on Friday, but were off earlier lows as oil prices weakened, while short-dated U.S. bond prices rose after economic data raised the possibility of an interest rate hike by the Federal Reserve this year. Department data showing U.S. retail sales excluding automobiles, gasoline, building materials and food services increased 0.6 percent in January also boosted optimism. Advances earlier in the week, sparked by moves by oil producers, including Saudi Arabia and Russia, to cap output, were erased after a record build-up in U.S. crude stockpiles kindled worries over persisting global oversupply. The Dow Jones industrial average lost 0.27 percent, the S&P 500 lost 0.09 percent and the Nasdaq Composite added 0.38 percent.

COMMODITIES

Commodities - Gold tumbled more than 2 percent on Monday, pulling further away from its highest in a year, as a rebound in stocks and profit-taking from China after the Lunar New Year weighed on the market. Bullion had climbed to a one-year high on Thursday as turmoil in global equities stoked safe-haven demand for the metal, along with the Japanese yen and U.S. Treasuries. Gold held onto earlier gains and snapped three days of losses on Wednesday, after minutes of the U.S. Federal Reserve's latest meeting showed policymakers considered changing their planned path of interest rate hikes in 2016. If the recent tightening of global financial conditions was sustained, it could be a factor amplifying downside risks to the economy, according to the minutes of the U.S. central bank's Jan. 26-27 policy meeting. Gold eased on Friday as investors cashed in some of the previous day's 2 percent gains, though expectations that rock-bottom interest rates would persist served to keep prices high. Prices remain up nearly 16 percent so far this year, with turmoil in the wider financial markets fuelling interest in the metal as a store of value while reducing the likelihood of further interest rate rises by the U.S. Federal Reserve. Spot gold was down 0.04 percent an ounce, and was on track to finish the week down 0.5 percent, its first week down in five weeks.

Sugar futures ended slightly higher on Monday in thin trading as the market digested news that more than 300,000 tonnes had been tendered against the March contract that expired on Friday. Cocoa and coffee futures were slightly lower, with volume diminished by the closure of U.S.-based contracts for Presidents' Day. Cocoa futures rose to a one-month high on Wednesday, buoyed by chart-based buying and spillover support from larger commodity markets, while the nearby spreads moved widely in volatile dealings. Sugar futures prices eased but remained above the prior session's 4-1/2 month low, maintaining their bearish tone after a big delivery against the March contract. Coffee futures were little changed in choppy dealings. Sugar futures extended losses to 4-1/2-month lows on Friday, weighed down by a weak currency in top grower Brazil and plentiful supplies, while cocoa turned lower after rising to a one-month high as the British pound bounced. Coffee prices were mixed as market participants awaited new fundamentals to provide direction.

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ENERGY

Crude Oil - Oil prices rose nearly 2 percent on Monday on news that ministers from Saudi Arabia, Russia, Qatar and Venezuela would hold a previously unpublicised meeting in Doha this week, adding to speculation of a global output deal. Russian Energy Minister Alexander Novak will attend the meeting on Tuesday in what would be the largest producer gathering since OPEC's last formal session in early December.

Oil prices rose 7 percent on Wednesday after Iran voiced support for a Russia-Saudi-led move to freeze production to deal with the market glut that had pressured crude prices to their lowest in a dozen years. U.S. crude rose after government data showed crude inventories in the country rose by 2.15 million barrels in the latest week. Analysts had expected a rise of 3.5 million barrels. br />

Oil prices fell 4 percent on Friday, with Brent down a third straight week, as record high U.S. crude stockpiles intensified worries that a plan to freeze world output will do little or nothing to reduce massive oil supplies already in the market. A slide in the U.S. equity markets, which have for weeks been trading in tandem with oil, also weighed on crude. This week, Saudi Arabia, the lynchpin of the Organization of the Petroleum Exporting Countries, along with Qatar and Venezuela, and non-OPEC member Russia, proposed to freeze output at January's highs. Iran, the main stumbling block to any production control due to its zeal to recapture market share lost to sanctions, welcomed the plan without commitment. Iraq was also non-committal.

Natural Gas – U.S. natural gas futures fell 3 percent to near two-month lows on Tuesday as forecasts for warmer-than-normal winter weather weighed on demand expectations for the fuel. Front-month March gas on the New York Mercantile Exchange fell for a fifth straight session, 3.3 percent, per million British thermal units. That was the lowest level for the contract since Dec. 23. March gas has lost 12 percent since its Feb. 8 settlement.

U.S. natural gas futures pared losses on Thursday after a government report showed a slightly higher-than-expected draw of gas last week for heating. Front-month natural gas futures on the New York Mercantile Exchange were down 2.3 percent, per million British thermal units. The U.S. Energy Information Administration said utilities pulled 158 billion cubic feet of gas from storage during the week ended Feb. 12, one of the coldest phases of this year's winter.

U.S. natural gas futures settled nearly 3 percent lower on Friday, close to a two-month low, as investors fretted over high inventories of the fuel while winter temperatures were waning in the United States. The market has fallen in seven of the last eight sessions on worries that relatively little gas had been used for heating this winter due to the warming effects of the El Nino weather pattern.