Weekly Market Update 2019 04 15

Oil Price Higher
The oil price crept higher last week, rising above $70 per barrel for the first time since November 2018. Traders have been pricing in potential supply disruption as the civil war in Libya escalates. This risk has added concerns to an already tight market which has been constrained by OPEC supply cuts and loss of sanction-hit production from Iran and Venezuela.

While Libya is a relatively small producer of oil, the removal of over 1m barrels a day from global supplies could have a significant impact on the price if other large suppliers did not step in to fill the deficit. The oil price’s flow through to inflation is rapid and the rally from the start of the year of over 40% is beginning to be seen in the data. While central banks tend to look through volatile data like this, the higher headline inflation figures will increase the pressure for rate rises over the coming quarters.

UK GDP
The Office for National Statistics (ONS) released its 3-monthly rolling GDP data last week, for the period of Dec-Feb. This showed that the UK economy grew by 0.3% over the period, matching the previous release. However, both figures were impacted by a particularly poor December 2018 when the economy contracted by 0.3%. This suggests that there may be better news on the horizon as the first quarter figure should show an acceleration in growth, provided the month of March remains positive.

The strong growth in the manufacturing component of GDP is consistent with other surveys which indicate that companies have been building up inventories for the potential Brexit disruption. However, now that there has been an extension, stockpiles may be unwound somewhat over the coming months.

Debenhams Enters Administration
The long-anticipated failure of the high street department store Debenhams came to pass last week. The stock was one of the most shorted in the market as the company struggled under a large debt pile and long lease terms on uneconomic stores. While the company has fallen into the hands of its lenders, it is unlikely to be the end of the chain; however, there are expected to be a series of store closures and rent renegotiations to ensure its viability. Debenhams failure is another symptom of the rapidly changing retail environment and illustrates what happens to those who are not willing to evolve and invest in new technologies.

Market data

Index Open Close Change % Change
FTSE 100 7446 7437 -9 -0.12%
S&P 500 2892 2907 15 0.52%
Dax 12009 11999 -10 -0.08%
Cac 40 5476 5502 26 0.47%
Nikkei 225 21807 21870 63 0.29%
UK 10 Year Gilt Yield 1.11 1.21 0.1 9.01%