March 2020

Daily update

Markets are trading in a world where there is plenty of spin, statements, and speculation, but very little information of substance. US President Trump’s statements on the Gulf war on Friday triggered a wave of optimism in markets, happily anticipated by some oil traders. Statements from Iran and events over the weekend have reversed some of that optimism.
The current situation is not dissimilar to that of March 2020. Markets know there will be a future economic impact—higher oil prices will do damage. There is also a realization that events are triggering structural changes. But current data does not fully reflect those changes (events have not had time to impact data, and consumers are temporarily using savings to smooth things over). There are thus few relevant facts on which to trade, and structural change makes predicting the future fraught with risks.
German March producer price data did show some effects of higher energy prices, with deflation almost disappearing. Metals prices (including precious metals) also added inflation.
Canadian March consumer price inflation is due. This is not typically a major market focus, but serves as a reminder that (absent nationalizing the oil industry, or imposing an export ban) consumers in oil-producing countries pay a global price for oil.