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Crude Oil Prices Have Come Under Pressure In Recent Days On Rising Global Growth Concerns

Market movers today

A relatively quiet day ahead in terms of data releases with the final reading of eurozone March HICP inflation due; the first release revealed a marked drop in headline CPI to 1.5% y/y (from 2.0% in February) and core inflation dropped to 0.7% (from 0.9%), a trend we think will be cemented in the months ahead, due partly to base effects of past energy price rises fading and due partly to subdued core inflation.

The ECB’s Coeure and Praet are both due to speak in New York and markets will stay alert to comments regarding how tolerant the ECB will be in seeing lower inflation prints ahead and to comment son whet her or not ‘exit easing’ discussions are ongoing at the Governing Council.

In the US, the Fed’s Rosengren is speaking and the Beige Book is released, which will be scrut inised for hints of whether the Fed sees a slowing US economy, as we have highlighted as a key risk following the fading Trump growth euphoria.

No Scandi events scheduled for today. For more on Scandi markets, see page 2.

Selected market news

Political risks continue to be in charge of markets after Prime Minister Theresa May yesterday called for an early UK general election, and as the first round of the French presidential election is coming up, this Sunday looks increasingly open.

While the UK Prime Minister still needs backing from the House of Commons to send voters to the polls on 8 June, she is likely to get t his in t oday’s session. See Brexit Monitor No. 28: Snap election increases number of uncertainty factors, 18 April 2017. Based on the most recent opinion polls, the Conservatives maintain a clear lead over Labour and due to the UK’s ‘first past the post ‘ system, this means that the Tories are likely to increase their majority lead in the Commons. This could leave the May government with a stronger mandate to negotiate Brexit. Crucially, the election call opens up the sample space for Brexit outcomes wi th markets notably eyeing a chance that Brexit may be softened, and, as a result , sterling cheered yesterday. EUR/GBP is trading around the 0.8350 mark this morning.

The upcoming French election is also adding to political risks in Europe near term with left-wing Mélenchon having seen a marked rise in the polls, suggesting he could win against Fillon or Le Pen should he manage to make it to the second round (st ill not the most likely outcome though). A potential run-off between the two EU-sceptics Mélenchon and Le Pen seems to be the biggest risk-scenario in the market at the moment. See French Election Monitor No. 2: Mélenchon could enter second election round in May for details.

Uncertainty has indeed grabbed hold of markets in recent days. Equity markets posted losses predominantly in the US and Asian sessions, dragged down by disappointing earnings and the souring risk sentiment more broadly. Oil prices have come under pressure in recent days on rising global growth concerns, while gold is moving higher still on geopolitical tensions. The safety of government bonds is back in demand with notably the Japanese 10Y benchmark yield falling below zero overnight .

Danske Bank
Danske Bankhttp://www.danskebank.com/danskeresearch
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