Oil Gains on US Plans to refill reserves

The major US equity indices were up Monday – with the tech-focused Nasdaq increasing nearly half a per cent, while the broad S&P 500 Index and blue-chip Dow Jones Industrial Average edged slightly higher – as investors remained hopeful about a debt ceiling deal following successful staff-level negotiations over the weekend.  European equity markets hovered around the flatline yesterday, with the Euro Stoxx 50 Index ending fractionally lower as gains in the mining sector were offset by losses in chemicals, media and retail shares. 

Summary for 16.05.2023 

• Most Asian equity markets rose on Tuesday, tracking some overnight resilience in US equities as markets awaited more cues on the world’s largest economy, although broader gains were held back by disappointing Chinese economic data.  Outperformance in Japan’s Nikkei 225 index persisted, with the index up 0.9% at an 18-month high as a strong first-quarter earnings season and a dovish Bank of Japan made local equities appear extremely attractive.  
• European equity futures were steady while their US counterparts were flat as investors weigh corporate results and disappointing China data. 
• Oil prices rose in Asia this morning, extending gains from yesterday’s session as the US government confirmed plans to begin refilling its heavily-drawn Strategic Petroleum Reserve (SPR), which sent a buy signal to markets.  The Department of Energy said on Monday that it will purchase up to 3 million barrels of oil for the SPR, confirming speculation over the move. 

• China’s industrial output grew 5.6% in April from a year earlier, accelerating from the 3.9% pace seen in March and marking the quickest growth since September, data showed on Tuesday.  But it was well below expectations for a 10.9% increase.  Retail sales also missed expectations, growing by 18.4% in April, less than expectations for growth of 21%, but well above the 10.6% rise in March. 
• Raphael Bostic, the president of the Atlanta Federal Reserve Bank, said he does not expect any interest rate cuts this year because he does not see inflation going down as fast as market participants believe, and if anything “we may have to go up”.  Similarly, Minneapolis Fed President Neel Kashkari suggested the central bank may have more work to do in its inflation fight. 
• The European Commission revised its growth forecasts yesterday, with the EU economy now expected to grow by 1% in 2023, compared to the previous winter forecast of 0.8%.  For 2024, the revised forecast indicates a growth rate of 1.7%, up from the previous projection of 1.6%.  In terms of inflation, the Euro Area’s forecasts were revised upward.  The projected inflation rate for 2023 is now 5.8%, an increase from the previous estimate of 5.6%.  For 2024, the forecasted inflation rate is 2.8%, up from 2.5%. 
• Microsoft on Monday received approval from the European Commission for its acquisition of Activision Blizzard.  The approval follows an in-depth investigation and commitments from Microsoft to ensure that the deal does not harm competition in the European Economic Area.