Daily Market Outlook, April 03, 2023

Opec+ Oil Shock As The Cartel Cuts 1.6Mln Barrels Of Supply, Oil Surges 8%

Asia equity markets start the holiday shortened trading week with modest gains as investors digest a surprise move by Opec+, with the announcement of a supply cut issued Sunday afternoon, the cartel have committed to slash supply by 1.6mln barrels leading to an 8% surge in crude oil prices ticking above $80 per barrel. Global markets ended the month and quarter in a positive tone, the benchmark SP500 notched up a 7% gain while the Nasdaq closed up 17% as markets continue to reprice Fed monetary policy calculating the potential for rate cuts into the back end of this year. In China, the March Caixin manufacturing PMI index edged back to 50 from 51.6 in February, the hotly anticipated China reopening impulse continues to prove lacklustre with the Chinese economy showing modest improvements with the exit from Covid restrictions.

This week is holiday shortened as such the data docket in the UK is scant, investors will keep an eye on Friday’s US Non Farm Payrolls report, today’s data dockets provides further manufacturing updates. The March PMI manufacturing data for the UK and the Eurozone are second looks, although some of the detail for individual countries in the Eurozone are published for the first time. The ‘flash’ releases showed UK activity dropping to a two month low however, the tone was more positive as supply chain concerns eased significantly . In the Eurozone, the headline number declined to a four-month low printing just below the pivotal expansion/contraction level of 50 but nudging closer to this number confirms continued incremental upside from depressed levels.

Today’s US ISM manufacturing report will likely remain sub 50 as with other major economies factory production remains short of the output seen in the services sector. Overnight Reserve Bank of Australia will deliver its latest perspective on economic conditions, the bank is expected to keep interest rate policy on hold following a 350bps hiking cycle since last May

CFTC Data

IMM net spec USD short increased in Mar 22-28 period
EUR$ +0.7% in period, specs absent as long rose 183 contracts to 145,025
$JPY -1.15% in period, yen spec +12,370 contracts now short 53,975
Lower UST yields amid bank crisis sends UST yield lwr, JP-US rates converge
GBP$ +1.05% in period, specs -3,586 contracts short grows to -24,084
AUD$ +0.55%, specs +3,106 contracts now short 35,353; CAD specs -4 contracts
BTC -2.99% in period, specs +345 contracts as BTC eyes trend highs (Source RTRS)