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Week in Review: 3-7 April 2023

 Summary and Comment

This week was marked by a surprise announcement by OPEC+, stating that oil production would be cut by around 1.16 million barrels per day. Now we need to see if the cut is executed and how the balance of offer/demand evolves over the course of the year (China re-opening vs slowing economy). But one thing seems certain: oil producers don't want the oil price to fall.

A few more economic indicators were released, which point to a slowing of industrial production and a cooling labor market in the US.

ISM Manufacturing PMI, in the US, came lower than expected. The reading pointed to a fifth straight month of contraction in factory activity, as companies continue to slow outputs to better match demand for the first half of 2023 and prepare for growth in the late summer/early fall period. New orders (44.3 vs 47), employment (46.9 vs 49.1) and backlogs of orders (43.9 vs 45.1) shrank faster. Also, production continued to decline (47.8 vs 47.3), inventories moved to contraction territory (47.5 vs 50.1), and supplier deliveries were the lowest since March 2009 (44.8 s 45.2).

The ISM Services PMI fell to 51.2 in March of 2023 from 55.1 in February and well below forecasts of 54.5. The reading pointed to the slowest growth in the services sector in three months, as demand and employment cooled.

JOLTs Job Openings came lower than expected, falling by 632,000 to 9.9 million in February 2023, the lowest since May 2021 and below market expectations of 10.4 million.

The trade deficit in the US increased to $70.5 billion in February of 2023, the highest in four months and slightly above forecasts of $69 billion. It reflects an increase in the goods deficit of $2.7 billion to $93 billion and an increase in the services surplus of $0.8 billion to $22.4 billion. Total exports went down 2.7% from January.

US-based employers announced 89.7K job cuts in March of 2023, 319% above 21.387K a year earlier and 77.77K in February as higher interest rates are forcing companies to cut costs. It was the third time this year that cuts were higher than the corresponding month a year earlier. Considering Q1, employers announced 270,416 cuts, the highest first quarter total since 2020, and a 396% increase from the 55,696 cuts announced in the same period one year prior. Technology companies have announced 102,391 cuts so far this year, up 38,487% from the 267 cuts the sector announced in the first quarter of 2022. Financial companies announced the second-most job cuts this year with 30,635, a 419% increase from the 5,903 cuts announced in the sector in Q1 2022.

For the week, the stock market is slightly in the red (big caps) and down overall (RUSSEL 2000, for example). The attempted rally of the past weeks has lost steam and we are now close to a resistance level - will it be penetrated or are we preparing for a few down weeks? Let's wait and see. Gold continues its trajectory up, and is now above 2000 USD/oz, silver is up ~3% for the week, oil is higher (80USD WTI, 85USD Brent crude). Finally, the US 2, 10 and 30 year yields are down 5-6% for the week, while the relative strength of the dollar (DXY) is ~0.6 % lower this week. Nobody talks about the bank failures anymore, and everything seems stable. Let's keep our eyes wide open.

Happy Easter.


Sources:
https://www.reuters.com/business/energy/sarabia-other-opec-producers-announce-voluntary-oil-output-cuts-2023-04-02/
https://tradingeconomics.com/
https://tradingeconomics.com/united-states/challenger-job-cuts



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