Market movers today
With the weakness in the oil price, market attention continues to be focused here.
Today, the Turkish central bank may lower interest rates a little bit more, according to consensus, but the TRY remains under pressure.
The main focus continues to be the PMI and US jobless claims tomorrow.
Markets will also note the various statements from EU heads of state ahead of tomorrow’s EU council meeting.
Selected market news
The oil price remained under pressure as Brent caught up to Monday’s sell-off in WTI, dropping below USD20/bbl. API yesterday reported that US crude stocks climbed another 13mb last week, which is evidence that inventories are approaching full capacity at a fast pace. Today the weekly inventory report from EIA will shed further light on the situation in the US oil industry. In response to the collapse in the oil price OPEC+ oil ministers held an unscheduled call on Tuesday to discuss the situation, but did not agree on further measures, while the US administration vowed additional steps to support the oil industry. Downside risks are dominating for now, with limited OPEC+ compliance, a slower-than-expected reopening of western economies and/or new virus waves requiring new closures still key risks. Upside risks are associated mainly with a shallower-than-projected global growth downturn and/or changed hedging activity, e.g. if consumers start taking advantage of the downward level shift now also seen at the longer end of the curve. Longer term: if/when demand recovers, prices are set to stabilise. See more in Oil hit by ‘black April’ but stabilising forces ahead (21 April) where we look into detail at the recent oil market sell-off and what awaits.
The spread between Italy and Germany’s bond yields is yet again nearing levels where the European Central bank actively begun to intervene in the market, just a few weeks ago. In addition, momentum continues to be for further widening. Markets will surely note the various statements from EU heads of state ahead of tomorrow’s EU council meeting but we think it will be difficult for the EU to surprise positively. Italy’s Giuseppe Conte said yesterday that a plan will be presented at a later point in time, to ease restrictions related to COVID-19 from 4 May.
In general, risk sentiment appears to be taking a step back this week. Equities are lower with cyclical sectors in the lead, Italy’s spreads keep widening and corporate credit spreads are also rising. This generally suggests markets are looking for a new catalyst. Over recent weeks, markets have indeed rallied quite a bit on the back of the prospect of opening up the economy and not least from seeing the fiscal and monetary response. However, we seem to have entered a new period where further policy response is more staggered and it still appears too early to truly get good economic data. Other upside surprises could come from a vaccine being found, economies opening up, EU policy response etc. but these do not appear to be moving closer just yet, although they quite likely all will at some point.
