1. The U.S. Federal Reserve is once again in control of markets as their public statements and posturing once again led analysts and media pundits alike to begin speculating anew that an interest rate hike is on the table for June.
2. The number of Americans filing initial claims for state unemployment benefits plunged by 16,000 claims last week to a new seasonally adjusted level of 278,000 claims. The previous week’s data remained unrevised. The sizeable drop in claims may bear out economists’ projections that the timing of spring break for New York City schools may have been a large factor in the previous week’s dramatic surge higher. Non-teacher school employees such as bus drivers and cafeteria workers are apparently permitted to file for unemployment when schools are closed for spring break and many economists blamed this factor alone for the previous week’s 20,000 claim surge.
3. Retail earnings continued to disappoint this week, for the most part, which set the retail sector up for its longest streak of weekly losses since 2008. If the retail sector closes lower for the week again on Friday, that will make 5 straight weeks of losses. The news came on the heels of the release of the Federal Reserve’s meeting minutes on Wednesday. The minutes, along with public comments made by Fed officials since the conclusion of that meeting, seem to point to a Federal Reserve that may be closer to enacting another interest rate hike in June, in spite of global macroeconomic evidence and analyst opinions that such a move could be a serious mistake.
4. An EgyptAir flight which left Paris for Cairo early Thursday morning disappeared just after crossing into Egyptian air space. Details are still sparse on exactly what happened, but the plane is believed to have crashed into the Mediterranean Sea and the search continues for evidence of the flight. Egyptian officials said that they could not rule out terrorism as a cause for the disappearance of the plane. On Friday the Egyptian military confirmed that they had located debris and some human remains believed to be from the missing flight, but as yet, the flight recorders have not been recovered.
5. China stoked tensions over the South China Sea again this week when a Chinese official told reporters that “The Chinese people do not want to have war, so we will be opposed to [the] U.S. if it stirs up any conflict. Of course, if the Korean War or Vietnam War are replayed, then we will have to defend ourselves.” The comments were made by Liu Zhenmin, a vice minister of the Ministry of Foreign Affairs. Speaking further on the subject of rising tensions in the South China Sea, Liu said “China attaches far greater importance to peace in the South China Sea – much greater than the U.S. and Japan. No one should doubt our sincerity in this subject. The Chinese government will uphold peace in Southeast Asia even for the sake of our own survival. In this sense we are actively against any moves that will jeopardize peace in the South China Sea. No country would want to see confrontations between [the] U.S. and China because [the] Chinese and U.S. economy will be hurt, and impacts will be felt across the world.”
6. On Wednesday, two Chinese fighter jets intercepted a U.S. military reconnaissance aircraft which was carrying out a “routine U.S. patrol in international airspace”, according to the Pentagon. The Pentagon described the intercept as “unsafe” and the Pentagon said that the Department of Defense was addressing the issue through military and diplomatic channels.
7. The Financial Times this week, citing unnamed sources, said that Saudi Arabia is set to launch its first international bond in an attempt to help boost the country’s finances after months of persistently low oil prices have caused it to burn through its cash reserves. Just last month, Saudi Arabia raised $10 billion through a 5-year loan it acquired through JPMorgan, HSBC and the Bank of Tokyo-Mitsubishi, so the bond sale will pile further debt onto that.
8. Crude oil prices rose again this week, approaching $50 a barrel as supply disruptions across the globe acted to put upward pressure on the price. In Nigeria, militants blocked access to Exxon Mobil’s terminal which exports the country’s largest supply of crude oil. Other militant activity elsewhere in Nigeria has also helped push crude production to 22 year lows. In Canada, the wildfire which continues to rage through the region’s oil sands area has cut production by nearly a million barrels a day. In the U.S., a growing wave of bankruptcies among shale oil producers and the shuttering of oil rigs as prices have languished has seen U.S. oil production fall by more than 9.6 million barrels a day over last year at this time. Despite all the supply disruptions, high output levels in the Middle East will likely act to keep supply levels from slipping too far and the global supply glut could continue.
9. The euro spent the first part of the week drifting mostly sideways against the U.S. dollar until the minutes from the Federal Reserve’s last Federal Open Market Committee meeting to set monetary policy were released on Wednesday. Following the release of the minutes, which appeared to show a Fed that was leaning towards undertaking another interest rate hike in June, the euro began dropping lower against the dollar and appears set to close the week there. The Japanese yen spent the first part of the week drifting lower against the U.S. dollar and the move to the downside accelerated after the Fed Meeting Minutes were released on Wednesday. The yen found a floor by late Wednesday night and began drifting higher against the dollar, but still appears set to close the week to the downside.

– Trading Department, Precious Metals International, Ltd.