The news shaping the markets today

US Secretary of State Antony Blinken and Defence Secretary Lloyd Austin are meeting with the Ukrainian President Volodymyr Zelenskyy in Kyiv as the war with Russia enters its third month. Investor caution sent the US dollar index slightly higher this morning.

Saudi Arabia’s trade surplus widened to SAR 60.1 billion in February, from SAR 25 billion in the year-ago month. Although this was the largest surplus since December 2016, the SAR/USD forex pair remained flat after the news.

WTI stock futures traded lower this morning after recording losses last week, as investors weighed a faster pace of tightening by the US Federal Reserve.

Paraguay’s central bank hiked its benchmark interest rate by 50 bps to 6.75% at its latest meeting. However, the PYG/USD pair remained flat in forex trading this morning, mainly on strength in the US dollar.

Chile’s producer price inflation eased to 24.9% in March, from 28.8% a month ago. This being the slowest increase in producer prices in twelve months lent support to the CLP/USD forex pair.

What’s happening: Shares of American Express fell on Friday, despite the company reporting upbeat results for its first quarter.

What happened: Although consumer credit spending surged to a record high in March, profits at American Express were impacted by a sharp rise in expenses during the quarter.

However, the company reaffirmed its bullish earnings and sales projections for fiscal 2022.

How were the results: The company reported a decline in profits but still managed to beat market views.

• Total revenues, excluding interest expense, climbed around 29% to $11.74 billion, topping consensus estimate of $11.62 billion.
• Net income declined 6% to $2.1 billion, or $2.73 per share, but came in higher than the Street expectations of $2.44 per share.

Why it matters: US consumer spending has been rising with people feeling more comfortable to travel, shop and dine out with the pandemic waning. There has been a sharp rebound in business travel after stagnating for almost two years due to covid-19 concerns and video conferences becoming a new normal.

Although there was a spike in infections in the US towards the beginning of this year, travel and entertainment spending on AmEx cards grew by a whopping 121% year-over-year, while goods and services spending rose by 21%.

US retail sales growth eased in March, with record high gas prices and accelerating inflation negatively impacting discretionary consumer spending. Retail sales grew just 0.5% from the prior month in March, following a 0.8% growth in February. US inflation also climbed to the fastest pace in around four decades last month, with WTI crude futures reaching a 10-year high in March.

AmEx suspended its operations in Russia in March, following the Ukraine invasion. However, this remains a very small market for the company.

Although American Express added 3 million new proprietary cards, its expenses surged 34% to $9.06 billion on higher customer engagement costs, exerting pressure on its bottom line.

Management confirmed their earnings forecast of $9.25 to $9.65 per share and revenue growth projection of between 18% and 20%.

How shares responded: Shares of American Express fell 2.8% to close at $180.54 on Friday, following the release of quarterly results, mainly on profit taking. The stock had climbed ahead of the earnings release and has gained around 7% year to date.

What to watch: Investors will keep an eye on the inflation level, rising covid-19 cases and the Russia-Ukraine situation.

The markets today

Crude oil will be in focus today after closing lower on Friday

Context: Oil prices fell on Friday, recording losses of more than 4% last week.

Details: Crude oil prices settled lower on Friday, following a volatile week of trading as traders digested Thursday’s comments from the US Federal Reserve chief Jerome Powell.

The Fed is projected to aggressively hike interest rates in the months ahead, in a bid to combat accelerating inflation levels that have hit multi-decade highs.

Traders also monitored the surge in covid-19 cases in China, with the country’s rigid policy expected to impact Shanghai’s business hub. However, production outages in Libya lent some support to oil prices.

On Thursday, Morgan Stanley raised its Q3 Brent price projections to $130 per barrel, from the earlier forecast of $120 per barrel. “Oil demand is likely to recover more slowly than we previously expected, but this is more than offset by a weaker supply outlook, driven by Russia and Iran,” Morgan Stanley analysts said in a note to clients.

On Friday, WTI crude for June delivery lost $1.72, or 1.7%, to close at $102.07 per barrel on the NYMEX. June Brent crude declined by $1.68, or 1.6%, to settle at $106.65 per barrel on ICE Futures Europe. WTI crude oil lost around 4.1% last week, while the global benchmark fell 4.5%.

May gasoline declined 1% to $3.305 a gallon, recording a weekly loss of 2.3%, while May natural gas fell 6.1% to $6.534 per million British thermal units, down around 10.5% for the week.

What to watch: Markets will keep an eye on rising covid-19 cases in China, which is expected to impact oil demand. The ongoing Russia-Ukraine war will also remain a major concern.

Other Markets: European trading indices closed lower on Friday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 down by 1.39%, 2.48%, 1.99% and 1.79%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Spain’s producer price inflation, Turkey’s manufacturing confidence index and capacity utilization, Germany’s Ifo business climate indicator and Ifo expectations indicator, Eurozone’s construction output, UK’s CBI industrial trends orders and quarterly gauge of manufacturing optimism, Brazil’s FGV consumer confidence index, Mexico’s economic activity, government revenues and Central Bank of Brazil’s focus market readout, Canada’s wholesale sales, as well as US Chicago Fed National Activity Index and Federal Reserve Bank of Dallas’ general business activity index.

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