On March 17, oil prices rose to their highest level in two weeks, driven by supply concerns following comments from U.S. Defense Secretary Lloyd Austin. Austin stated that the U.S. would continue its attacks on Yemen’s Houthis until they cease their attacks on shipping. This statement sparked fears of disruptions to oil supply, which led to an initial rally of more than 1% in oil prices.
However, these gains were pared back later in the session, with investors considering the potential for an imminent end to the ongoing war in Ukraine. The possibility of peace talks between U.S. and Russian officials has increased expectations that Russian energy supplies could return to Western markets soon. U.S. President Donald Trump announced plans to speak with Russian President Vladimir Putin about ending the war in Ukraine, which further affected the oil market outlook.
By midday, Brent crude futures were up 0.61% at $71.01 per barrel, while U.S. crude futures rose 0.63% to $67.60 per barrel.
European Shares Edge Up Amid Strong Gains for the Year
In contrast to the oil market, European stock markets showed strength on Monday, with shares rising as investors continued to buy into the region’s equities. The STOXX 600 index climbed by 0.4% on the day, marking a year-to-date gain of 7.6%. This sharp rise comes as European markets have outperformed their U.S. counterparts. Last week, the S&P 500 entered correction territory, with a year-to-date loss of 4.3%.
The rally in European stocks has been fueled by optimism surrounding Germany’s fiscal policies. Germany’s plan to overhaul its fiscal policy, which includes a €500 billion ($540 billion) infrastructure fund and changes to borrowing rules, has boosted investor confidence. The German parliament’s budget committee recently approved the bill, with votes expected in both the lower and upper houses this week.
Euro Hits Five-Month High
The euro also strengthened, nearing a five-month high, and was last trading at $1.0881. Market analysts are closely watching the Bundestag vote on Germany’s fiscal package on Tuesday. If the bill passes, it is expected to support the euro further. However, if it fails, it could negatively impact the euro, potentially leading to a decline.
Paul Mackel, global head of FX research at HSBC, noted, “The idea of Germany’s fiscal loosening being more in the euro’s price will be assessed on Tuesday. It would be very euro-negative if it fails to pass.”
China’s Retail Sales Data and Policy Measures
In China, data released on March 17 showed that retail sales growth accelerated in January-February. Despite this positive economic indicator, Chinese stocks remained largely unaffected. Beijing’s ongoing efforts to boost domestic consumption through new policy measures had little impact on local equities or the yuan, which remained steady at 7.2409 in the offshore market.
Chinese stocks posted a modest gain of 0.2%, while other Asian markets also showed positive performance. South Korean stocks rose by 1.7%, and Japanese equities gained 0.93%.
U.S. Futures Slide Amid Recession Concerns
While European markets enjoyed a positive session, U.S. futures saw a decline as concerns about a potential recession grew. This contrast highlights the ongoing divergence between U.S. and European market performance. Investors are wary of the economic uncertainty ahead, particularly as central banks, including the Federal Reserve, the Bank of Japan, and the Bank of England, are expected to hold their current monetary policies this week.
Overall, the market remains focused on central bank decisions, geopolitical developments, and economic data that could drive the next phase of market movement.
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