Markets Weekly

18 April 2019

Week ahead

There’s no rest for investors: despite the Easter holiday, next week promises a shower of new data, both at the macro and micro level.

On the economic side, we look forward to a clearer view of the US housing market, with new home sales and mortgage applications numbers being announced for March and April respectively.

No Easter break for the market

Last month’s weak mortgage application figures contrasted with a consistently positive surprise in new home sales over the last quarter.

The first estimate for the US’ Q1 GDP will be announced on Friday, alongside the latest personal consumption expenditure (PCE) figure - the Fed’s preferred measure for inflation.

Europe’s key releases will be consumer confidence on Tuesday and the German IFO on Wednesday – the most closely-watched economic leading indicator in Germany. We wait eagerly for the latter as we look for confirmation of the nascent recovery that was spotted last month.

On the micro side, next week is the busiest of this reporting season in the US.

More than a third of the S&P500 companies, by market cap, will report their quarterly earnings. We still believe that earnings surprises will be good enough to bolster earnings growth into positive territory from the currently expected small decline.

In Europe, the reporting also starts in earnest with a quarter of the Stoxx Europe 600 market cap posting results for the first quarter.

Chart of the week

Oil price spike defies global economic slowdown

Oil price has risen 50% since its trough in December as measured by the West Texas Intermediate (WTI) price.

Despite a global economic slowdown, the WTI price is back to where it was a year ago. This is mostly explained by limited short-term supply.

Lower than expected US production, good compliance on production targets from OPEC and Russia, US sanctions on Venezuela and Iran’s oil exports, as well as renewed political instability in Libya, have all contributed to the recent price spike.

In the short term, the supply picture is likely to remain uncertain.

When the oil price was close to $80 a barrel last October, the US government issued a series of waivers to eight countries regarding the Iran sanction. This allowed them to continue Iranian oil imports.

Those waivers are up for review in a few weeks, and the direction of the oil price is likely to influence the US government’s decision.

The Organization of the Petroleum Exporting Countries (OPEC) and Russia will also review their output target at their next meeting in June. This is likely to create some short-term volatility in the oil market as visibility remains limited.


Chart of the week


Oil: taking the plunge

After spiralling by 45% in Q4 last year, oil prices have rebounded close to 50% from their lows, according to West Texas Intermediate figures.

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