Theres a lot going on this week, buckle up
Despite the ceasefire still in place, over the weekend, foreign ships came under Iranian fire, and US forces seized an Iranian ship. As a result, this morning, oil prices are up, stock markets are down, but not dramatically so. Oil is trading around $90 a barrel, and US futures are indicating a decline of around 70 basis points when the market opens later today. After the strength of last week’s rally, that could be considered a fairly muted reaction to the events of the weekend. One of the strongest recoveries in history will either turn out to be fool’s gold or a sign of confidence in the ultimate outcome. One thing about the events of the past few weeks has reminded us that, despite the world’s desire to become less reliant on oil, the global economy remains heavily dependent on it. Ed Miliband’s, I am sure, ideologically well-intentioned refusal to use our oil reserves and instead buy the commodity from those who do use theirs seems misplaced.
Looking at other news, there will be a raft of earnings out this week to digest, with roughly 20% of the S&P 500 reporting. Some of the feature names include key reports from Tesla (Wednesday), IBM, Intel, Procter & Gamble, Boeing, GE, Honeywell, Lam Research, and 3M, to name a few of the better-known household names.
On the macro front, the US will release retail sales for March, expected to rise 1.3% year over year and extend the period of consumer strength, despite consumer sentiment reports indicating otherwise. Flash S&P PMIs for April will be released this week, and these reports will better reflect the impact of current events in the Middle East on economic sentiment in both the services and manufacturing sectors. Federal Reserve Chairman nominee Kevin Warsh will testify before Congress, which could be interesting to see if he has a view on current events and US monetary policy, although he appears unlikely to take up his post until the spat between Powell and Trump is sorted.
In the UK, we have an interesting week ahead for central bankers, with probably the two most important economic indicators: inflation and jobs. Annual inflation forecast to rise to 3.3%. The unemployment rate is expected to remain unchanged at 5.2%, the highest level since early 2021. Total average weekly earnings, including bonuses, are projected to increase by 3.6%. The jobs number would suggest lower rates; inflation remaining well above the Bank’s target would suggest an increase. In the end, if the numbers do come as forecast, the status quo will remain.
