It’s been a slow start to the week in the markets as investors have an eye on what’s to come with earnings season getting into full flow and major economic releases on the agenda.
We’ve reached an interesting moment in which investors have been forced to retreat on post-SVB positioning on rate hikes, albeit not entirely, but they seem far from convinced that central banks will actually follow through and, if they do, that they will not reverse course.
The reason for the apprehension is that early evidence suggests credit conditions have tightened in the aftermath of the mini-banking crisis but the extent to which it has happened, what the real economic consequences are, and what exactly it means for interest rates isn’t clear.
And this is occurring at a time when inflation appears very stubborn but is set to fall sharply due to favourable base effects but the pace of disinflation is ultimately what, along with credit conditions, will determine how central banks respond. I feel things may look very different in a couple of months’ time but for now, we have to patiently play the waiting game.
Earnings season is obviously giving us plenty of food for thought in the interim but the first day of the week isn’t typically the most thrilling and we’re seeing another example of that today. Stock markets are treading water and we may see that continue throughout the rest of the session.
Uncertain outlook weighs on crude as prices almost close the post-OPEC+ gap
Oil prices are a little higher at the start of the week, bouncing back after largely closing the post-OEPC+ gap from a few weeks ago. Prices came within a whisker of doing so and could potentially attempt to again. For now, it’s paring recent losses and crude finds itself back within the range it traded in, in the month’s leading upto the SVB collapse.
Time will tell whether OPEC+ decision to cut output will push oil prices back to $100 as some feared but it doesn’t look particularly promising at this point. The economic outlook has deteriorated but the degree to which that is the case is still unclear.
Gold stalls shy of record highs but traders not giving up hope yet
Gold is marginally higher today but remains quite choppy overall. The uncertainty over the outlook has seen the rally stall just shy of record highs and while traders don’t seem particularly keen to give up on it, the fact that interest rate expectations have become slightly more hawkish recently has made rediscovering momentum challenging. With plenty of data and earnings to come this week, that may well change.
For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/
Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA
