Oil slump continues, easing inflation fears

European indices are on the rise once again this morning, with stocks within the region providing an ongoing theme of outperformance despite yesterdays mixed US session. This morning has seen the German economy back in the limelight, with a marginally better than expected industrial production report marred by a downward revision to the February metric. The return to negative growth for German industrial production means that this key indicator is now 12% lower that its 2017 peak. While we have seen recent signs of optimism over a potential bottoming out in the German manufacturing sector, the weakness evident in this week’s industrial production and factory orders data serves to highlight the ongoing struggles they will face trying to turn this ship around. For investors, there is little desire to wait for the German economy to turn a corner, with the DAX pushing up towards record highs once again today.

Dollar gains have helped drive energy markets lower once again, with crude oil falling into an eight-week low. Concerns over a fresh inflationary flare-up have eased somewhat thanks to a $10 decline in US oil prices over the past month. The US decision to hold off on providing fresh ammunition to Israel given concerns over a potential ground offensive in Rafah serves to highlight a desire to reach a ceasefire, which would help ease concerns over continued tension in the Middle East. Today’s US crude inventories data provides a fresh concern for oil bulls, with oversupply the big potential issue at play given last week’s whopping 7.2-million-barrel build reported last week.

Yesterday’s US session saw a handful of big names provide a drag on the index, with sharp declines for Tesla and Disney accompanied by Nvidia and Microsoft weakness. Today sees a raft of key US earnings come into focus, with Uber Technologies and Spotify both reporting before the open. Last year saw Uber move into profitability for the first time since their IPO back in 2019, shifting the narrative away from the idea that the company will forever be loss-making. The task ahead revolves around improving margins and continuing to lift earnings as they seek to build on last year’s milestone achievement.