Oil Rises Again On Surprise OPEC+ Output Cut

Oil prices rose for a third consecutive week after OPEC and its allies including the likes of Russia and Mexico announced a shock production cut last Monday. The 1 million barrel output reduction came after previous assurances that supply would be held steady with OPEC+ having previously stated intentions to cut 2 million barrels of production until the end of the year. The announcement saw prices surge by more than +6.0% with Brent Crude ultimately concluding the holiday shortened week +6.8% higher at $85 a barrel. Elsewhere within the commodities sphere, gold moved back above the $2,000 an ounce threshold with the metal receiving some support from weak services production data in the US.[1]

Moving to global equity markets, returns were mixed with most Western markets closing on Thursday for the Easter holidays. In the US, the S&P500 was largely flat, a -0.1% weekly return reflective of light trading volumes whilst in Europe, the Euro Stoxx concluded the week -0.2% lower. Moving to the UK, the FTSE100 added +1.4% with the mid cap centric FTSE250 shedding -0.7% on some modest weakness in Sterling. Meanwhile in Japan, the Nikkei 225 fell by -1.9% with concerns relating to the country’s announcement of export restrictions on certain semiconductor components to China weighing on sentiment.[2]

Regarding sovereign bond yields, US treasury yields retreated on the back of the weak economic data previously mentioned. The closely monitored 10-year security fell by 8 basis points (bps) to 3.40% with additional retreats seen across the yield curve. As for the UK, the equivalent duration gilt yield declined by 6bps despite a modest Purchasing Managers Index (PMI) upgrade for the Services sector whilst on the Continent, the 10-year index fell by 11bps to 2.19%. That latter retreated even after further hawkish comments from European Central Bank (ECB) President Christine Lagarde and Chief ECB Economist Philip Lane who both hinted towards further interest rate hikes over the coming months.[3]

Week Ahead

In what is another shortened week due to the Easter holidays, domestic focus this week will be on Thursday’s monthly GDP data which covers February. The economy is expected to have expanded by +0.1% during the month, building on the +0.3% uptick seen back in January. Other UK data to keep an eye include retail sales from the British Retail Consortium (BRC) and industrial production. As for the US, all eyes will be firmly on Wednesday’s CPI inflation release with the headline index forecast to have slowed materially last month. If accurate, the 5.2% expected figure would represent an 80bps reduction on February’s level. Retail sales are also published in the US this week whilst on Thursday, the Federal Reserve releases the minutes from its most recent monetary policy meeting. In the Eurozone, it is a somewhat limited weak for key data releases with retail sales and industrial production amongst the key figures due. As for Asia, Chinese inflation, both consumer and producer have already been released during the early hours on Tuesday morning. There are no major numbers due from Japan on this occasion.[4]

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[1] ISM Institute for Supply Management, 11/04/23

[2] T. Rowe Price, 11/04/23

[3] Refinitiv, 11/04/23

[4] Forex Factory, 11/04/23

SJP Approved 11/04/23