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Protrader – March 2019 Market Wrap

//Protrader – March 2019 Market Wrap

XJO
Taking a breath. UP 11

March was a month that saw the market take a deep breath and digest the recent rise so far this calendar year. An initial rally saw the market hit its highest level in 5 months, with the remainder of the month being very quiet, trading a fairly narrow band of 175 points, with a high 6270, and an intraday low of 6096 was hit on the 27th of March following US yield inversion, finally closing at 6180, the markets were definitely in a wait and see phase.

Apart from domestic concerns particularly around the banking and housing sector, the market was impacted by international factors such as China’s stimulus package announcement, which followed a series of poor economic data figures and a Brazilian court decision suspending VALE SA Iron Ore exports (12.8 m tonnes pa), which resulted in a flow-on benefit to both RIO & BHP.
KEY ECONOMIC DATA

  • Unemployment Rate hit 8 yr Low of 4.9%
  • Australian job Vacancies edged up.
  • RBA held the cash rate steady @ 1.50%, For the 31st consecutive month.
  • GDP rate .2% for the Qtr.
  • China Industrial Output/ Retail sales slowed fell to 17yr low.
  • China lowered its economic forecast.
  • China factory data contract 3rd straight month.
  • UK: Lowest unemployment rate since 1975.

DOW JONES IND AVG 26,000 – 25,929: Treading Water. Down 71

DJI 12 MONTH CHART

Following on from the headwinds experience in the last week of February, the Dow struggled till Friday the 8th of March to regain any momentum, with the market gearing up for earnings season in April, the focus was on more eclectic macro factors.

The two big stories of the month were the pending resolution and amicable high-level negotiation between China and the US Trade talks, and the 2 yr Muller probe concluding, which found zero collision between Trump and Russia, thus negating any likelihood of impeachment.

The positive sentiment, beginning on Monday the 11th carried through the remainder of the month, locking in a great quarter.

  • Dow gained 11.2%, biggest QTR rise since 2013
  • NASDAQ best QTR since 2012, up 16.5%
  • S&P 500 posted best Qtr in a decade 1998

Key Developments in the Month of March

  • ISM (US Manufacturing) Data, lowest since Nov 2016
  • New Home sales beat market expectations
  • Fed Reserve left US Interest rate unchanged
  • US unemployment rate dropped to 3.8%
  • Yet again another better than expected labour report, jobless claims only 211,000
  • US housing starts soared by 18.6%, beating market expectations
  • US trade deficit widened to$59.8 b for Dec./ Annual 10 yr high  $621b

OIL PRICE UPDATES: Oil Prices Rising

WTI Crude – Gained $ 2.86: $57.55 – $60.41

Following on from last months price movement Oil prices continued to rally closing the month with the best quarterly price growth in a decade.

A perfect storm is forming around Oil prices with both supply and demand side issues contributing to the rally.

DEMAND FACTORS

As one can see from the above chart, despite persistent and continued concerns regarding world economic growth and demand, the underlying data simply is yet to support that hypothesis, with oil prices rising to the highest level since November

US crude stockpiles shocked the market with the biggest drawdown since July 2018. What has been more surprising is the China data, that continues to flout the struggling economic narrative. February China Crude Oil refining hit an all-time record, rising 6.1% from last year to 12.68 mbpd.

SUPPLY FACTORS

On the supply side, there are still a myriad of issues, both know, unknown and unknown -unknown’s that are plaguing supply-side analysis. An example of the known is the US trajectory of Oil export tightening from Iran, announcing the next stage of sanctions in May will proceed, reducing exports by a further 20%.

An example of an Unknown – Unknown was the arrival of Russian personnel in Venezuela, which has completely thrown any outlook, or likely scenario planning into disarray. Although production/ exports from Venezuela is already practically zero, the involvement of Russian military personnel physically on the ground removes any capacity of determining likely exports time horizon.

All of these elements has contributed to Oil’s price rally.

What will be next?

Key Oil Price Influences

  • OPEC announced supply cuts with SA below 10 mbpd.
  • Saudi Arabia agreed to maintain production cuts until June.
  • Saudi Arabian minister Khalid Al -Falih committed SA production cuts until June.
  • Continued Libyan fighting near Oil Fields.
  • US Oil production rose to record 12.1 mbpd – Now worlds top crude Oil producer.
  • US Oil Exports rose to 3.39 mbpd.