Breaking News
Get 40% Off 0
Is NVDA a 🟢 buy or 🔴 sell? Unlock Now

Stocks Move Up, Oil Retreats

By Markets.com (Neil Wilson)Market OverviewMar 28, 2022 09:26
uk.investing.com/analysis/stocks-move-up-oil-retreats-200514253
Stocks Move Up, Oil Retreats
By Markets.com (Neil Wilson)   |  Mar 28, 2022 09:26
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

European stocks are higher out of the gate on Monday. Ukraine sounded ready to make a number of concessions to call off the war, including neutral status, though any progress seems difficult still. The fact the Kremlin on Friday narrowed the goals of its operation to areas in the south and east suggested it was struggling on the ground; it bodes well for Ukraine that Kyiv is not the prime target – scope for a ramp out for Putin and Zelensky.

We left last week on a bit of a sour note in terms of the European and UK consumer sentiment. EU consumer confidence has tumbled due to the war in Ukraine, whilst business confidence has also been shattered. In the UK, escalating fuel, energy and staff costs resulted in the steepest rise in prices charged since the PMI series began in November 1999. Escalating inflationary pressures and concerns related to Russia's invasion of Ukraine meanwhile led to a slump in business optimism to its lowest since October 2020. 

Friday saw the US consumer also looking in a tough spot. The University of Michigan consumer survey said 32% of all consumers expected their overall financial position to worsen in the year ahead, the highest recorded level since the surveys started in the mid-1940s. “The combination of rising prices and less positive income expectations meant that half of all households anticipated declines in inflation-adjusted incomes in the year ahead.” Of course, inflation is the chief topic at the kitchen table: Inflation has been the primary cause of rising pessimism, with an expected year-ahead inflation rate at 5.4%, the highest since November 1981. 

Ahead of this week’s nonfarm payrolls report, it’s worth noting the following from UoM: “The sole area of the economy about which consumers were still optimistic was the strong job market. Consumers anticipated in March that during the year ahead it was more likely that the unemployment rate would post further declines than increases (30% versus 24%).” 

Rates moved aggressively higher on Friday, with the US 10-year now above 2.5% and the 2s10s spread down to just 10bps, and this weighed on stock market sentiment a tad but not much. What’s been noticeable is the ability of stocks to shrug off rising rates. This cannot last and we saw cracks appear on Friday. Higher rates plus deteriorating conditions for consumers are bound to drag stocks down. Volatility has declined with the vix down to the mid-20s, which indicates conditions for chopping sideways. 

Week ahead...With the Federal Reserve going all-in with the hawkish language, traders will be watching a barrel-load of key US economic data this week for clues as to the likely course of action by the central bank in the months ahead. PCE inflation, PMI releases and the all-important nonfarm payrolls report mean this will be a busy week ahead.  

Inflation … US CPI inflation hit 7.9% in February, the highest level for 40 years. Now the focus will be on this week’s PCE inflation report, which is the Fed’s preferred measure of inflation. Last month’s report covering the month of January showed the PCE price index increased 6.1 percent from one year ago, reflecting increases in both goods and services. Energy prices increased 25.9 percent while food prices increased 6.7 percent. Excluding food and energy, the PCE price index for January increased 5.2 percent from one year ago.  Market pricing suggests the Fed could do two back-to-back 50bps hikes at the next two meetings. Recent rhetoric from several Fed officials indicates growing support for a more hawkish move. Jay Powell left the door open to 50bps hikes last week, saying inflation was much too high. The core PCE inflation number will help policymakers decide. 

Jobs … The jobs report has arguably taken on a little less significance of late, since we know the labour market is extremely tight and inflation is the main worry for the Fed. The last two reports have indicated very strong labour market growth at the start of the year and this trend is likely to Nevertheless, there is still a tendency for volatility around the release and traders will be paying extra close attention to the wage data for signs of a wage-price spiral so feared by policymakers.

Other data … Market participants will also be watching for the ISM manufacturing PMI from the US, as well as the Chicago PMI. Ahead of the nonfarm payrolls report on Friday, we get the ADP jobs number, whilst JOLTS job openings are released on Tuesday.

Oil markets and other commodities will continue to remain sensitive headlines from the Ukraine conflict. Peace talks have yielded little and increasing concerns about tightness in the physical market were evident last week with steep backwardation emerging again in the futures curve. However, prices of crude were lower early Monday as fears about Chinese demand did the rounds after officials started to lock down Shanghai. OPEC+ meets this week.

Stocks Move Up, Oil Retreats
 

Related Articles

Adam Harris
March Madness on the way!   By Adam Harris - Feb 25, 2024 1

With the bull-market still in full swing, this week will be waiting on Gold to move higher, and the USD to pick a lane! Economic Calendar Events & Fundamental Concerns USD Index &...

Stocks Move Up, Oil Retreats

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Tony Ode
Tony Ode Mar 28, 2022 10:13
Saved. See Saved Items.
This comment has already been saved in your Saved Items
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email