Live Markets: FTSE seen bucking weak European start

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03/04/2023 07:46

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    FTSE SEEN BUCKING WEAK EUROPEAN START (0643 GMT)
    European shares were set to open on the back foot on Monday
as inflation jitters resurfaced following a surprise OPEC+ oil
production cut, although futures on the commodity-heavy FTSE 100
index edged up 0.2%. 
    Oil stocks were set to rally across the region following a
rally of peers in Asia with premarket indications from traders
calling for gains of more than 2% for oil majors BP  BP.L ,
Shell  SHEL.L , TotalEnergies  TTEF.PA  and Eni  ENI.MI . 
    Elsewhere, eyes are on Hyve  HYVE.L  after the Financial
Times reported that M&G Investments and two others will vote
against a private equity takeover of the British events group. 
    Still in M&A, LNG firm Exmar  EXMR.BR  was also in focus
after top shareholder Saverex announced a minority buyout.
    Finally, logistics firm DSV  DSV.CO  was set to open lower
after a share placement. 
    
        
    (Danilo Masoni)
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    OIL SPIKE A BLACK MARK FOR INFLATION, CONSUMER DEMAND (0559
GMT)
        Oil prices have stolen the show in Asia on Monday, and
not in a good way if you care about global inflation and
consumer spending power. 
    The Organization of the Petroleum Exporting Countries and
their allies including Russia (OPEC+), stunned markets by
announcing production cuts of about 1.16 million barrels per
day, preempting a meeting of ministers due later on Monday.
    Brent and U.S. crude futures both jumped more than 5%,
though they were off the early peaks. Analysts assumed OPEC+ was
trying to put a floor under prices, around $80 a barrel for
Brent and $75 for the U.S. flavour of oil, and Goldman Sachs
quickly raised its forecast to $95 a barrel for year end.
    Then again, some thought it might also suggest producers
were worried that demand was missing bullish forecasts given
physical cargoes are arranged months in advance of delivery.
    If the price increase sticks, it will be bad news for
headline inflation and will leave a sour taste after Friday's
core U.S. Personal Consumption Expenditures data seemed to bode
well for a cooling of cost pressures.
    The market responded by pushing bond yields and the dollar
higher, while paring expectations for how much the Federal
Reserve may cut rates later in the year. Futures have around 38
basis points of easing priced in by December, compared to more
than 100 basis points during the banking crisis of mid-March.
    Yet, higher petrol prices are also a tax on consumers and
have a close correlation to consumer sentiment, especially in
the United States. It's also unlikely to be taken well by the
White House given the political pain of higher gas prices.
    Concerns about consumer demand were not helped by the
Caixin/S&P survey of Chinese manufacturing in March that badly
missed forecasts at 50.0, largely due to a weakness in export
orders.
    This survey concentrates on smaller firms and exporters and
suggests foreign demand is a headwind for China even as the
domestic service sector roars back.
    Export-reliant Japan and South Korea also saw manufacturing
activity contract in March. Both are major importers of energy,
so they will not welcome the spike in oil.       
    
    Key developments that could influence markets on Monday: 
    - The Joint Ministerial Monitoring Committee (JMMC) of the
OPEC and non-OPEC countries meets via videoconference 
    - March PMIs for Europe, while the U.S. ISM survey of
manufacturing is seen easing a touch to 47.5. Auto sales for
March will offer an early read on consumer demand  
    -  Federal Reserve Board Governor Lisa Cook speaks on the
U.S. economic outlook and monetary policy 
    
    (Wayne Cole)
    *****