April 3, 2023
Good morning,
We start the new week/month/quarter off this morning with a bit of a surprise – an OPEC production cut. It has sent crude oil sharply higher. Oil is already off its overnight highs and, thus far, the impact on other markets has been moderate. A 5-6 basis points move across the curve these days does not register as anything terribly significant given last month’s extreme bond volatility around the bank liquidity commotion. Futures are in the middle of their narrow overnight range, down -.20%.
There’s no doubt that OPEC’s surprise decision to cut production has reignited the global inflation scare. But non-oil markets may be tempering their reaction because the history of +7% moves in oil on the opening trade shows similar moves in the past faded away almost immediately (Bloomberg Analytics). History doesn’t always repeat, but after a half-day of trading (London Exchange), the odds of a repeat look high.
The big data report this week – monthly employment figures – prints on Friday when markets are closed for a holiday. Great. That is not another surprise like this morning’s, but it may feel like one by the end of the week.
See you Wednesday.
Be well,
Mike