09 January 2024
If you are covering the latest news in financial markets, please find below a comment from Lindsay James, investment strategist at Quilter Investors:
“Yesterday’s plunge back into winter brought a flurry of Eurozone economic data with it, which largely continued to show a worsening picture of the manufacturing and retail sectors even as the ECB’s Governing Council member Boris Vujcic noted they are not discussing rate cuts and probably will not do so before the summer. Retail Sales declined 1.1% year on year in November, weaker than expected, whilst German manufacturing orders also missed expectations of 1% growth, achieving only 0.3%. In contrast, sentiment indicators continued to improve off a low base, with the Eurozone Economic Confidence Indicator rising for the third consecutive month and now at the highest level since May, and the Consumer Confidence Indicator also up for the third month in a row to a 22-month high. This improving sentiment is yet to translate into activity, with German industrial production this morning reported at -0.7% month on month, below expectations of a flat reading. This will continue to pile pressure on the ECB for rate cut discussions to begin well before the distant summer months, despite their recent pushback on this.
“In better news for inflation and manufacturing costs, if not global demand, oil prices declined over 3% on Monday on the news that Saudi Arabia cut the February official selling price of its crude products by $1.50-$2 a barrel. This is another signal that global manufacturing is struggling to shake off its near 18-month downturn, but comes at a time when geopolitical risks are on the rise. Additionally, with US oil production now at record highs, perhaps surprisingly so under a President keen to underline his green credentials, this domestic production meets two-thirds of US daily demand and makes them the largest global exporter of oil after Saudi Arabia. Whilst ‘drill, baby, drill’ was Sarah Palin’s famous slogan in 2008, this has clearly been taken to heart by the Democrats and is visibly changing the landscape not only for supply and demand dynamics, but also perhaps making western wars over oil a thing of the past.”
