Afternoon Note
In a far less robust start to the week, the S&P 500 and the Dow Jones Industrial Average re-entered negative territory, while the tech-heavy NASDAQ managed to hold onto positive gains for much of the session. Additionally, the Organization of the Petroleum Exporting Countries (OPEC) announced today that it sees the price of oil remaining well below $100 per barrel in the next decade, seeing prices around $76 per barrel in 2015 in the most optimistic scenario. As a result, crude oil prices remained subdued near the $60-level.
Domestically, economic news was non-existent, however while we are looking to raise interest rates, on the other side of the world, they are being cut. Yesterday, the People’s Bank of China announced that it has cut the benchmark lending rate by 25 basis points to 5.1% for the third reduction since November 2014 thanks to lower economic growth and declining property prices. The central bank also reduced one-year benchmark deposit rates by 25 basis points to 2.25%. The Chinese economy is still facing massive downward pressure, overall domestic prices remain low, and real interest rates are still above historical averages. In Q1-2015, the Chinese economy expanded by 7.0% which was down from a 7.3% increase experienced in the prior three months. This is the lowest quarterly growth rate since Q1-2009 due to a major slowdown in manufacturing and property investment. The annual rate of inflation has been below 2.0% since September while the producer price index (PPI) has declined by 4.6% in April and has been on the decline since March 2012. Home prices in China were on decline for eight straight months until a slight increase of 0.21% in January 2015, but they have since returned to the decline from February onward. The chart below shows the changes in the Chinese benchmark interest rate; this news marks the lowest interest rate recorded in China in the last fifteen years.
Comments |
I hear from my friends in Germany that they had electric rates 4 times as much as our so they are closing the nuclear power plants and reverting back to coal. This should make Mr. Putin very sad because before, Germany was totally dependent on Russia for it's gas. Could our president learn anything from this......I doubt it. tom wayne on 5/11/2015 2:23:19 PM |
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