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Pressure resumes

Pressure resumes

After an optimistic finish to trading last week pressure has returned this morning. Crude oil is trading at eighteen-year lows after a 4.6% opening fall this morning, and US share futures are down after major gains on Friday night. Bonds and gold are also lower this morning, although crypto markets are bid higher.

The New Zealand dollar is holding above 60 US cents after a surprisingly strong read on first quarter inflation. Forecasts centred on a lift of 0.4%, giving an annual rate of 2.1%. Instead the CPI increased by 0.8%, boosting inflation for the year to 2.5%. Food prices increased significantly. Market reactions are muted by the fact the data refers to the pre-Covid19 period.

Local factors could drive regional shares today. Strait Times index futures closed slightly higher on Friday night but a doubling in Singaporean infection rates over the last week could push the market into the red. The Australia 200 index also recorded a minor gain to end the week, put concerns about the impact of new rules to allow emergency withdrawals from superannuation may weaken share prices today.

The plunge in crude oil prices reflects a glut at the main US storage facilities at Cushing. Cash prices for West Texas crude are at their lowest since January 2002, and have de-coupled from Brent crude, with the spread between the two reaching a decade high. The ongoing pressure reflects worries that the historic agreement to cut global output by 10 million barrels a day may not offset the virus induced demand destruction.

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