Global equities rebounded from the four day sell off, surging higher on Tuesday. A recovery in US treasury yields, combined with the possibility of a positive conclusion for Brexit and US – Sino trade negotiations has encouraged investors to take a more optimistic outlook on the economy; pushing recession fears back.
European bourses charged higher led by Paris and with the FTSE lagging behind, hindered by the stronger pound.
Stronger than forecast French GDP data boosted sentiment whilst Dax traders shrugged off falling morale amongst consumers. Up to now, it was German manufacturing which has been the weakest link. Today we saw German consumer confidence unexpectedly declined heading towards April. This is particularly poignant as domestic demand will need to drive the German economy this year as exporters struggle with the slowing global economy, Brexit and the ongoing trade tensions.
The move lower in consumer confidence should only be short lived, as high employment and strong wage growth should ensure German consumers continue to spend well. However, this is on the assumption that uncertainty caused by Brexit and the ongoing US - Sino trade dispute doesn’t pick up further.
Brexit update
The pound charged higher as Theresa May could finally be getting her way with Brexit. With the threat of Brexit not happening, Eurosceptic Rees – Mogg has finally filed behind Theresa May and is publicly saying that he will support her deal.
The DUP was less forthcoming yesterday, so doubts remains as to whether or not Theresa May has the numbers she needs. We do know that the PM said she will only put her deal to Parliament if she thinks she can push it through. So, the fact that Thursday is being lined up for the third meaningful vote indicates that she is optimistic. In the case that it does get accepted we expect the pound to push ahead towards $1.34.
Oil bounds higher
Oil rebounded on Tuesday, surging 2% and pushing through $60.00 Crude oil is on track for its best quarter since 2002.
Supply remains well supported thanks to output cuts at OPEC. Russia’s energy minister confirming that the country was on track to meet its pledged output cut was music to the ears of oil traders. By the end of this month Russia will be hitting output cut targets. Whilst other factors such as sanctions on Iran and Venezuela have also limited supply, it seems demand is taking a back seat right now.
Concerns of demand easing on slowing global growth are not hitting oil in any serious manner. Oil is up 30% year to date on OPEC’S output cuts. Crude dipped just 2% when recession fears alarmed the market and these losses were quickly recouped.
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