Food prices fall, alcohol and fuel rise

The price of fruit and vegetables fell in March but any savings have been eaten up by other cost of living rises. Picture: File Source: news.com.au

FRUIT and vegie prices fell this month, but any savings were eaten up by increases in the cost of fuel, alcohol and tobacco.

The TD Securities Melbourne Institute Monthly Inflation Gauge increased by 0.2 per cent in March for a 2.1 per cent annual pace, which followed a flat monthly result in February.

It was the lowest annual inflation outcome for eight months, renewing expectations of another official interest rate cut by June.

Consumer prices rose slightly in the month as increases in the cost of alcohol, tobacco, clothing and footwear were offset by falls in fruit and vegetables, household appliances and audio, visual and computing equipment.

Fruit and vegetable prices fell by 1.4 per cent in March while the price of automotive fuel rose by 0.5 per cent.

TD Securities Head of Asia-Pacific Research Annette Beacher expects forecasts for the March quarter consumer price index to increase by 0.5 per cent in the quarter to be 2.6 per cent higher than a year ago.

She said the Reserve Bank of Australia would leave the cash rate on hold at three per cent until June amid benign inflationary pressures.

"Recent events in Europe are a reminder that offshore risks remain, even if the risks of outright financial market contagion are minimal," Ms Beacher said.

TD predicts a final 25 basis point rate cut to 2.75 per cent by June if a soft inflation report is delivered.
Ms Beacher said the inflation rate was expected to fall slightly by the end of the year.

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Oil prices slide to January lows on Italy

Source: Supplied

GLOBAL crude oil prices have dived to fresh one-month lows as inconclusive Italian national elections sparked fresh economic uncertainty in the eurozone, dealers say.

Brent North Sea crude for delivery in April sank to $US112.61 per barrel - the lowest point since January 28. It stood at $US112.78, down $1.66 from yesterday's closing level, in later London deals.

New York's main contract, West Texas Intermediate (WTI) or light sweet crude for April, slid to $US91.92 a barrel - a trough last witnessed on January 4. The contract later pulled back to $US92.35, down 76 cents from yesterday.

"Crude oil prices gave back recent gains and slid lower on Tuesday (overnight), following the global downside momentum as uncertainty over the Italian elections limited risk appetite and left investors concerned that Europe's third largest economy may be heading for a hung parliament," said Sucden analyst Myrto Sokou.

"Thus, the focus has switched again to the European debt concerns, with Brent oil retreating back to $US113 per barrel, while WTI crude oil slides lower to retest $92 per barrel."

European equities slumped and the euro hit a near two-month dollar low overnight as dealers assessed the fallout of Italy's political impasse after elections in the indebted eurozone country.

A stronger greenback also makes dollar-priced crude more expensive for buyers using cheaper currencies, denting demand.

"There's a sea of red across trading screens... as the lack of a clear winner in the Italian elections is causing panic amongst investors," said analyst Angus Campbell at trading group Capital Spreads. "The result is a mass sell off of equities, in particular Italian and other banking stocks, the euro and pretty much any other risk asset you can think of."

A political deadlock loomed in Italy as it appeared Sunday's elections failed to produce a clear winner.

Polls show that while the leftists won the lower house, the party run by former prime minister Silvio Berlusconi had more seats in the upper house.

A majority in both chambers of parliament is required to form a government, leaving Italy in a state of limbo.

"Investors will focus their gaze on Italy's election results, which could see the eurozone's third largest economy face political deadlock in the coming months, casting doubt on further progress of economic reforms and rekindling eurozone fears," said analysts at Vienna-based oil consultancy JBC Energy.

"Meanwhile, the West and Iran will get another chance to lift the current stalemate, as talks begin in Almaty on Tehran's nuclear program.

"While the talks are unlikely to yield concrete results, any positive news from the meeting may exert downwards pressure on oil prices."

In Almaty, world powers and key crude producer Iran have exchanged offers in crunch talks aimed at breaking a decade of deadlock over Tehran's nuclear drive.

The two-day meeting comes as sanctions bite against the Islamic republic and Israel still refuses to rule out air strikes to knock out Iran's suspected nuclear weapons push.

The first round of closed-door talks started at around 0830 GMT after an initial bilateral meeting between the Chinese and Iranian delegations.

The world powers are offering Iran permission to resume its gold and precious metals trade as well as some international banking activity which are currently under sanctions, Western officials said.

But in exchange, Iran will have to limit sensitive uranium enrichment operations that the world powers fear could be used to make a nuclear bomb, the sources said.

Tehran insists its nuclear programme is solely for peaceful energy and medical uses.

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Oil prices dive - will it impact petrol prices?

Source: PerthNow

GLOBAL oil prices slid as traders worried over poor economic data, a potential end to US stimulus measures, and signs of weaker-than-expected American crude demand, analysts say.

Brent North Sea crude for delivery in April fell $US1.57 to $US114.03 a barrel in overnight deals in London.

New York's main contract, light sweet crude for April tumbled $US2.20 to $US93.02 per barrel.

The market accelerated earlier losses after downbeat reports on US jobs and European business activity which compounded concerns about flagging global demand for energy.

The US government's Labor Department said initial jobless claims rose to 362,000 in the week ending February 16, more than the analyst estimate of 358,000.

A Markit report on the eurozone business activity meanwhile showed its purchasing managers index (PMI) hit a two-month low at 47.3 in February, down from 48.6 the previous month.

Oil was already falling after minutes from the Federal Reserve's most recent meeting showed some members in favour of cutting short the $US85 billion-a-month bond-buying spree introduced last year to support the world's biggest economy.

The news, combined with speculation over a massive sell-off by an unnamed investment fund, had sent crude futures plunging by about $US2 yesterday.

"Investors are continuing to sell crude oil, along with risk assets in general, after the FOMC's last meeting minutes further confirmed fears that the Fed may withdraw or reduce QE sooner than had been expected," said analyst Fawad Razaqzada at GFT Markets.

"On top of this, economic data has been disappointing today, with those eurozone PMI figures and several US pointers missing expectations."

Meanwhile today, the US government's Department of Energy (DoE) announced that American crude inventories rose by 4.1 million barrels in the week ending February 15.

That was more than double market expectations for a gain of 1.7 million barrels, according to analysts polled by Dow Jones Newswires, and indicated weaker-than-expected demand in the world's biggest crude consuming nation.

The DoE report was published one day later than normal owing to a public holiday on Tuesday.

Crude futures were also pulled lower on Wednesday by speculation that major oil producer Saudi Arabia was mulling plans to lift production to meet strong demand from Asian powerhouse China, analysts said.

The market also slid on news that global powers were ready to make key oil producer Iran an offer over their long-running dispute with Tehran.

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