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The near 3% drop today sees oil poised for a potential decline of over 10% this week with not much reprieve in sight. The previous low in April this year touched $55.15 before a bounce on the tariffs pause. But even then, it hardly resulted in a change in confidence in the oil market. In fact, as things went on one can argue that we’re seeing the developments turn for the worse.

The latest news from Saudi Arabia here doesn’t add much encouragement whatsoever to an already struggling outlook.

With the global economic backdrop set to soften amid tariffs and demand conditions also hit hard by the US-China trade standoff, the fact that OPEC+ continues to push for output increases is just adding a heavy burden to oil prices in the current landscape.

It’s a tough one to weed out and the only saving grace looks to be a turning point on the tariffs front. That will be a key spot to watch for oil, considering it is getting little help elsewhere – in particular from OPEC+ and its members.

This article was written by Justin Low at www.forexlive.com.

The crude oil market experienced a rough month due to Trump’s aggressive tariffs announcement on April 2 that made the market to expect lower demand on the slowdown in the global economy coupled with higher supply as OPEC+ planned to increase production by more than expected.

We saw a strong rebound though on April 9 as Trump paused the reciprocal tariffs for 90 days and the market expected more de-escalation and started to price out the global slowdown. The delay in reaching the trade deals and fresh positive supply news eventually weighed on the sentiment and prices rolled over once again.

Yesterday, crude oil extended the selloff as we got the news that the Saudi officials have told allies that they can sustain a prolonged period of low prices in what sounded like a threat of a price war. The focus is clearly on supply right now, but a non-consensus trade opportunity could be in the cards.

Global ocean container bookings have seen a significant decline since the tariffs announcement with bookings from China to US being down 60%. If Trump eases tariffs, we could experience a covid-like bullwhip effect where all those cancelled orders get rebooked creating a huge surge.

The expectations for strong demand and a rebound in global growth will likely push prices higher and a rally to the 70.00 handle on WTI wouldn’t be surprising. But being a contrarian is not enough because you have to get the timing right.

Michael Steinhardt, a trading legend, once said that ideally you should be able to tell, in two minutes, four things:

• the idea
• the consensus view
• the variant perception
• the trigger event

The trigger event, in my opinion, could be the details of the first trade deal. Markets will derive future expectations from that first deal. I think an average tariff rate of 10% or lower (the lower the better), would be the catalyst for a rally in crude oil prices. The idea would be invalidated in case we get a higher rate of course.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Trump tariffs to have ‘tremendously adverse’ impact on the US economy.
• They ‘hobble’ companies that rely on critical minerals supplies from China.
• About 40% of goods imported into the country were inputs for domestic production.
• The odds for a recession have gone up.
• Tariffs could be particularly problematic for the US clean energy sector.
• We are highly dependent on China for most of the critical minerals that go into the clean energy technologies.

It’s a very consensus view that tariffs will likely have an adverse impact on the US economy and that the recession probabilities have gone up. The market priced that in soon after the April 2 announcement, but started to price out that view after Trump’s pause on April 9.

The market is now looking forward to positive resolutions that will eventually trigger the opposite effect: the US economy will bounce back and economic activity will rise. That’s why trade talks and negotiations are critical. If they disappoint the market, then we will likely go back to price in the recession.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

It is mostly tech shares leading the charge though with Nasdaq futures marked up by 1.4% currently. The late rebound yesterday was certainly intriguing but it’s been followed up with some better earnings releases from Meta and Microsoft. Dip buyers are continuing to hold the line with the S&P 500 looking to build on last week’s push above 5,500. Some relevant headlines in case you missed them:

• US Q1 advance GDP -0.3% vs +0.3% expected
• The market sees more Fed rate cuts after the weak US GDP but it could be wrong
• US recently reached out to China for tariff talks – report
• Meta EPS $6.43 versus $5.21 estimate. Revenues $42.31B versus $41.36B estimate
• Microsoft earnings beat expectations

This article was written by Justin Low at www.forexlive.com.

• Manufacturing PMI 45.4 vs 44.0 prelim
• Prior 44.9

Key details:

• New orders and employment all decrease.
• Input cost inflation at 28-month high.

Comment:

Rob Dobson, Director at S&P Global Market Intelligence

“The start of the second quarter saw UK manufacturing
buffeted by adverse global market conditions, rising cost
pressures, deteriorating supply chains and increased
trade uncertainty. April saw further contractions in
output, new orders and exports, as well as a slump in
business confidence to its lowest ebb since November
2022.

“Although domestic demand remains soft, overseas
demand is especially weak. New export business fell
at the quickest pace for nearly five years, with demand
from clients in the US, Europe and mainland China all
declining. Surveyed manufacturers noted that US tariff
announcements were having a noticeable impact on
global markets as trading partners adapt to increased
trade volatility.

“Manufacturers are also seeing an increasingly harsh
cost environment, with purchase price inflation hitting
a 28-month high. Alongside general raw material price
increases on global markets, UK producers are also facing
domestic inflationary pressure from increases to National
Insurance, minimum wages and the knock-on impact of
the latter on higher pay grades. These increased costs
are resulting in a combination of higher selling prices
and cutbacks to non-essential spending on staffing
and purchasing, potentially reinforcing the ‘rising costs,
declining demand’ backdrop.”

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Prior 65.48k; revised to 65.09k
• Net consumer credit £0.9 billion vs £1.2 billion expected
• Prior £1.3 billion

After a decrease of £1.0 billion in February, net borrowing of mortgage debt by UK individuals rebounded sharply in March by by £9.7 billion to £13.0 billion. Meanwhile, net consumer credit is seen falling with the annual growth rate also easing further to 6.1% – down from 6.4% in February.

This article was written by Justin Low at www.forexlive.com.

The stock market bottomed a week after the April 2 announcement when President Trump paused the reciprocal tariffs for 90 days on April 9. That week we reached the peak in trade escalation and from that moment onwards, the risk/reward picture favoured the upside for the de-escalation trend.

The negative data continues to be faded because it’s old news and the market is looking forward to positive resolutions and eventually higher economic activity as the trade uncertainty wanes. This trend is likely to remain intact until we get the details of the first trade deal. If the average tariff rate is 10% or lower, we should see the market continuing higher and eventually make new all-time highs.

Conversely, a rate above 10% would likely be a disappointment and the market could go back pricing in slower growth with the stock market selling off again.

On the daily chart, we can see that the S&P 500 broke above the key resistance level and the major trendline. We got a retest of the broken resistance yesterday when the US GDP triggered some short-term weakness, but eventually we got back to the highs and even made new ones. The next target is the swing level around 5,800 price region.

On the 1 hour chart, we can see the short-term selloff triggered by the US GDP that eventually bottomed around the key 5,480 level where the dip buyers piled in and got some support from good US Core PCE data. Later in the day, we also got the news that the US reached to China for tariff talks which supported further upside. And everything culminated with strong tech earnings.

We now have the 5,596 level as the closest support where the buyers could step in with a defined risk below the level to position for further upside. In case of a break though, the sellers will likely push the price all the way back to the 5,520 level where we will find a minor upward trendline. That will be the next support for the dip-buyers.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Rate cuts by year-end

• Fed: 100 bps (91% probability of no change at the upcoming meeting)
• ECB: 64 bps (86% probability of rate cut at the upcoming meeting)
• BoE: 96 bps (96% probability of rate cut at the upcoming meeting)
• BoC: 53 bps (55% probability of rate cut at the upcoming meeting)
• RBA: 118 bps (92% probability of rate cut at the upcoming meeting)
• RBNZ: 78 bps (75% probability of rate cut at the upcoming meeting)
• SNB: 33 bps (81% probability of rate cut at the upcoming meeting)

Rate hikes by year-end

• BoJ: 10 bps (97% probability of no change at the upcoming meeting)

We can see that since the last update, the biggest moves in interest rate expectations happened with the Fed and the BoJ. The market increased the easing bets for the Fed following the weaker than expected US Q1 GDP yesterday. and decreased the tightening bets for the BoJ following the dovish policy decision and Governor Ueda’s comments.

These expectations hinge on the trade deals though. If the details of the first trade deal show that the average tariff rate will be at or below 10%, then we can expect the market to reprice the expectations on a more hawkish side. Markets tend to overshoot expectations and that’s what provides traders with mean reversion opportunities.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

In the bigger picture, the pair is seeing a neat double-bottom bounce off the 140.00 mark. And the jump higher today sees the pair now move to its highest in three weeks. It’s largely a yen move here as the BOJ left interest rates unchanged, before governor Ueda came out to deliver some less hawkish (more dovish) messaging.

Ueda said that there’s a lot of uncertainty now stemming from US tariffs and how that is impacting the global outlook. He adds that inflation and wage pressures are now expected to cool and that there will be a delay to reaching their 2% price target. On the latter, Ueda says that it is “not simple” anymore to just talk about hitting the inflation target as such.

Overall, it points to a further pause in the current monetary policy stance. As things stand, that is likely to extend to June at the very least.

This article was written by Justin Low at www.forexlive.com.

London markets will be open for trading though but the other major hubs in Europe are all closed in observance of Labor Day. As such, there will be lighter flows in general but that won’t stop an already busy-looking market to start the new month. The dollar is keeping steadier across the board, keeping with overnight gains. But was it all just month-end?

That comes after a dismal Q1 advance GDP report, owing largely to trade, one which Trump is shifting the blame away from. Equities also staged a neat comeback yesterday, before US futures are seen advancing today after earnings beat from Meta and Microsoft. Tech shares are leading the charge with S&P 500 futures up 0.9% and Nasdaq futures up 1.4% on the day.

Earlier, the BOJ left interest rates unchanged as expected but the yen is down on some minor disappointment. Ueda’s press conference will be up next at 0630 GMT.

Besides that, there’s not much else on the agenda in European trading besides the UK mortgage/credit conditions report for March at 0830 GMT.

This article was written by Justin Low at www.forexlive.com.

The post Ex-Dividend 1/5/2025 first appeared on IC Markets | Official Blog.

US Stocks Flat but Rally After the Bell – Dow up 0.35%

US stocks recovered in trading yesterday to close near flat, but futures rallied after the bell on good earnings reports from both Meta and Microsoft. The Dow closed the session up 0.35%, the S&P up 0.15%, and the Nasdaq dipped just 0.09%. The dollar gained back some of its lost ground again, the DXY up 0.49% to 99.63, whilst Treasury yields slipped again, the 2-year down 4.7 basis points to 3.603% and the 10-year down 1 basis point to 4.163%. Oil prices were smashed again to lock in the worst month for over three years, Brent down 3.37% to $61.15 and WTI down 3.66% to $58.72 a barrel. Gold also slipped again, losing 0.85% on the day to close at $3,287.72.

Investors Hoping We May Have a Smoother Month Ahead

Some investors will be happy to see the end of what has been one of the most volatile months the market has seen for years. The major focus for markets over the course of the last four weeks has been US tariffs and President Trump’s back-flipping of proposed tariff levels and implementation plans that has left even the most experienced traders in a state of confusion. Traders are now hoping that the peak of tariff confusion is behind us and the next few weeks will bring more clarity to the market and allow for more informed investment decisions to be made. If we do start to get some trade deals completed in the near term, then expect optimism to creep back in, but if uncertainty and delays continue, we could see further downside across all products.

Choppy Calendar Day Ahead for Traders

It could be a choppy day ahead for global markets today with several major financial centers closed for holidays and some major macroeconomic events scheduled. The Asian session has Chinese markets closed today, but the major focus will be on Japan, with the Bank of Japan due to deliver its latest rate call during the day. There is little on the calendar in the London session, with Germany, France, Italy, and Switzerland markets all closed for May Day holidays, which will see liquidity diminished and any moves exacerbated. The New York session sees more key data releases today, with the Weekly Unemployment Claims (exp. 224k) and the ISM Manufacturing PMI data (exp. 48.0) the highlights.

The post General Market Analysis – 01/05/25 first appeared on IC Markets | Official Blog.