Top 5 Things to Know in the Market on Friday
Investing.com - Here are the top five things you need to know in financial markets on Friday, April 20:
1. Oil flat as Russia contemplates easing quota levels in H2
Oil prices were slightly higher on Friday, remaining near their highest level in over three and a half years after officials from the Organization of the Petroleum Exporting Countries and Russia met in Saudi Arabia.
The joint OPEC and non-OPEC panel found that compliance with the agreement to curb production hit another “record high” of 149%, while the global supply glut has been “virtually eliminated”.
Oil inventories in developed nations in March stood at 12 million barrels above the five-year average, a source told Reuters. That’s down from 340 million barrels above the average in January 2017.
Russian Energy Minister Alexander Novak commented that a discussion of easing the quota levels could begin in the second half of this year or 2019, although he insisted that it remained to be seen if the market rebalancing was sustainable.
In the press conference following the meeting, Saudi energy minister Khalid Al-Falih said that while compliance is the highest level ever, producers still have have a long way to go and that a new inventory target would likely be chosen in May with the help of the OPEC technical committee
Still ahead, the weekly installment of drilling activity from Baker Hughes will provide investors with fresh insight into U.S. oil production and demand after data last week showed the number of active U.S. oil rigs rose for the second straight week.
U.S. crude oil futures rose 0.23% to $68.45 at 6:01AM ET (10:01GMT), while Brent oil gained 0.27% to $73.98.
2. Earnings: All Eyes on General Electric
Focus on earnings will continue to drive sentiment in stock markets as a slew of names report corporate earnings Friday.
Of the 74 S&P firms that have reported earnings through Thursday, 80% have beat on both the top and bottom line.
Some of the more notable names due to report earnings before U.S. markets open on Friday include General Electric (NYSE:GE), Honeywell (NYSE:HON) and Schlumberger (NYSE:SLB).
GE’s earnings report is expected to be the pick of the bunch on Friday. The firm’s guidance will be closely watched after Goldman analyst Joe Ritchie said in a note to clients that a cut to the outlook is “almost a certainty”.
While waiting for the reports, U.S. futures pointed to a lower open on Wall Street. At 6:04AM ET (10:04GMT), the blue-chip Dow futures fell 34 points, or 0.14%, S&P 500 futures slipped 2 points, or 0.07%, while the Nasdaq 100 futures lost 17 points, or 0.25%.
3. Markets wait for Fed speakers with eyes on Treasuries
With no major economic data on Friday’s agenda, market participants will continue to look for clues on monetary policy from Federal Reserve members.
Cleveland Fed president Loretta Mester reiterated her view that the central bank should forge ahead with plans to gradually reduce policy accommodation.
“If the economy evolves as I anticipate, I believe further gradual increases in interest rates will be appropriate this year and next year,” she remarked on Thursday evening.
Markets have largely priced in that the Fed will hike rates twice more this year. Fed fund futures put the odds of the next rate hike coming in June at around 97%, according to Investing.com’s Fed Rate Monitor Tool. The probability of another increase in December was seen at about 88%.
Chicago Fed president Charles Evans was scheduled to speak on the economic outlook and monetary policy at 9:40AM ET (13:40GMT) Friday, while San Francisco Fed chief John Williams will make an appearance at 11:15AM ET (15:15GMT).
While waiting for the remarks, bond yields saw some volatile trade on Friday. After passing 2.9% a day earlier, the yield on the 10-Year Treasury note continued to tick higher on Friday. The yield on the 2-Year note turned lower after hitting 2.441% overnight, its highest level since September 2018.
4. Cable drops as BoE governor dampens rate hike expectations
The pound moved lower against the dollar on Friday after Bank of England governor Mark Carney hinted that market expectations for a rate hike in May could be overblown.
Late Thursday, Carney told BBC that while markets could expect gradual rate hikes in the coming years, he didn’t want “to get too focused on the precise timing”.
The BoE chief pointed to weak business surveys and retail sales as some of the softer data.
“I am sure there will be some differences of view but it is a view we will take in early May, conscious that there are other meetings over the course of this year,” he said in the interview.
Cable was last off 0.09% at 1.4073, after having hit an intraday low of 1.4036.
5. Japanese inflation holds steady, reinforcing forecast for BoJ to stand pat
Japan’s core price index held steady at an annualized gain of 1.1% in March, while underlying inflation stuck at 0.9%. Both readings were in line with consensus.
The data reinforced a Reuters’ poll released Friday that showed the Bank of Japan is expected to keep monetary policy unchanged at its meeting next week, with inflation still far from the bank's 2% target.
Sources familiar with the central bank's thinking told Reuters that the BoJ is likely to maintain the view that inflation will reach its 2% target next fiscal year, and will stay near that level the following year, when it issues new forecasts next week.
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