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A QUARTER FOR THE AGES (0711 GMT)
Whether you are a macro-guru or an astute stock picker, this is a quarter that most investors would like to forget.
Most consensus trades coming into 2022 including long value stocks, yield curve steepeners and buying euros have been crushed. Not only world stocks have witnessed the most gut-wrenching volatility in years, the first three months of the year has fuelled the strongest commodities rally since World War I and the fastest rise in global interest rates in decades.
But as the dust settles on the first quarter, stock markets are slowly finding their feet. U.S. stocks are back to within 5% of the all-time high struck on January 4. A global stock index will end the quarter down around 4%, its worst performance since the pandemic crash two years ago but well above the 14% year-to-date drop only two weeks ago.
Bond and currencies have fared worse. A Bank of America U.S. Treasuries index is on track for its worst quarterly performance in 25 years while the Japanese yen has declined a whopping 6% in the last three months, a speed of decline only rivaled by the British pound after the Brexit referendum vote. Volatility has soared across asset classes. But taking the 30,000 feet view above the quarterly market performance, some longer term trends are emerging. Russia’s invasion of Ukraine means global supply chains will remain under pressure for the forseeable future and global policymakers will struggle to control rampant inflation without choking growth.
For now, markets are taking the optimistic view. U.S. and European stock futures are higher and oil prices lower on signs the Biden administration is considering a massive release of crude oil from U.S. reserves to combat inflation. However, a slide in Chinese stocks as output data reflect the damage of renewed lockdowns in technology and factory hubs weighed on Asian markets. Treasuries added to price gains, while a portion of the curve has pulled out of a brief inversion that raised concerns about an impending recession.
Key developments that should provide more direction to markets on Thursday:
– U.S. data dump: Personal income, spending, Initial jobless claims.
– Sweden’s H&M reports smaller-than-expected profit
– China’s factory and services sectors swung into negative territory in March,
– French inflation rises more than expected in March to record 5.1%
– COVID spending helped UK economy to grow in late 2021
– Foreign Affairs Sergei Lavrov in China
– ECB bank supervisor Andrea Enria, ECB board member Philip R. Lane, ECB Vice President Luis
– New York President John Williams
– OPEC and non-OPEC Ministerial Meeting
– US weekly jobless claims/PCE price index
– Emerging markets: Colombia, Czech central banks
EUROPE SET TO GAIN AS OIL PLUNGES (0650 GMT)
European futures are signalling a firmer open this morning, as oil prices dropped overnight amid news the U.S. is considering the largest ever draw from its emergency oil reserve.
Set to erase some of yesterday’s losses, Eurostoxx futures are 0.34% higher while Germany’s DAX is set to open 0.56% up . Meanwhile FTSE futures have been teetering around the zero mark, last up 0.05%.
The price of a barrel of brent crude oil plunged as much as 5% overnight, and was last at $109.34 . With the view to lowering surging fuel prices, the White House is mulling the release of up to 180 million barrels of oil over several months from strategic reserves, according to sources.
Meanwhile indices in Asia are softer after economic data showed a manufacturing slowdown. Shares in Ferretti debuted in Hong Kong after the Italian yacht maker last week priced the first IPO by a European company since Russia invaded Ukraine in February.
Polish parcel locker company InPost said it expects pressure on its margins to materialise this year amid rising costs and uncertainty caused by the Russia-Ukraine conflict.
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