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Market Wrap
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The major U.S. stock market benchmarks are looking more likely to end lower today after starting the day largely higher on hopes that the talks between Russia and Ukraine could soon lead to the end of hostilities. The European bourses and the FTSE closed the London session in the green with the FTSE100 up 0.81% in the week where the Bank of England are anticipated to raise the bank rate for the third consecutive month.
According to reports, China could take a more pro-Russian stance though the Chinese have so far denied that the Russians have asked for military assistance, but United States President Joe Biden is reportedly planning a trip to Europe amid the current crisis.
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Oil futures prices fell on Monday as several Chinese business centres, including Shanghai and Shenzhen, were locked down following a two-year high in Coronavirus cases. The National Health Commission (NHC) of China said earlier that COVID-19 numbers have still not peaked in the provinces of Jilin and Guangdong, as well as in the city of Shanghai. We have seen from previous rising Coronavirus cases the detrimental effects of supply chain bottlenecks and the lack of economic activity is bearish for demand in energy.
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The USDCAD was a beneficiary to the flows into the US dollar and depreciation in the energy commodities prices. The Canadian dollar which is correlated to the price of oil dropped and the USDCAD cross having found a buyer on the dip is now pushing towards my 1.28500 initial target. Inflation expectations for the US consumer increased again to 6% in February 2022, the same level as in December and November, and reversing some of January’s sharp declines. The FOMC this week are highly anticipated to tackle rising inflation with their rate hikes, but most market analysts think this is too little too late and will be ineffective. However, a drop in energy prices would bring inflation down should they be able to sustain lower prices.
Chevron announced today that they are preparing to trade Venezuelan oil if the US changes its license and permits it to operate in the heavily sanctioned country. This is all building towards an increase in supply in the next 6 months. The EIA reported today that they see oil production for April rising to about 117,000 barrels per day, a hike of about 18,000 BPD from March. UK PM Johnson is also looking to Saudi Arabia to increase oil production according to an article in the FT. Currently LNG is still transiting through Ukraine.
The heatmap shows the euro as being the relatively strongest currency all day whereas there has also been a distinct change in sentiment with the commodity currencies turning a lot weaker. The risk-off isn’t quite there as the yen is also weaker still.
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The EURUSD has stalled at the 1.0975 as expected and the rise being on the back of quite a shaky ceasefire talk is likely to come lower on a renewed escalation of aggression by Russia.
