Oil talks break down, while UK inflation edges up

April 18, 2016

Over the weekend, a significant number of OPEC and other large oil exporting countries met in Doha to discuss a possible freeze in production. The rally which has been seen in crude oil prices over the past three months has partially been driven by the hope of such a deal. Therefore, when it was announced that no agreement was reached, oil prices opened sharply downward. The main hindrance of the deal was a lack of participation by Iran. The Iranians are reluctant to freeze their oil production at this stage as their output remains depressed following the lifting of sanctions last year. The largest OPEC producer Saudi Arabia does not wish to freeze their production knowing that market share will be taken by their Iranian rivals. While there is still hope a deal could be reached, regional politics may make such an outcome more difficult.

In the UK markets had a strong finish last week, with the FTSE 100 closing at a level not seen since the start of December 2015. UK March CPI was announced on Tuesday signalling a surprise acceleration in price growth with a reading of 0.5% for March, up from 0.3% in February. The increased readings were driven by price rises for air fares, clothing, and footwear. While the 0.5% figure remains below the Bank of England’s 2% target for inflation, the data is moving in the right direction. The inflation announcement coincided with the monetary policy committee confirming that UK interest rates would remain unchanged at 0.5%. This was widely expected by the market.

China’s official GDP growth figures were released on Friday, showing that growth slowed to 6.7% in the first quarter. This remains in the government’s growth target range of 6.5-7%, however, official figures are always treated with suspicion. Growth continued to be driven by increasing consumer spending. Chinese retail sales rose at a rate of 10.5% in March indicating that the economy continues to rebalance away from manufacturing, in line with government policy. Furthermore, a sharp and unexpected increase in industrial asset investment was recorded.


Index Open Close Change % Change
FTSE 100 6204 6343 139 2.24%
S&P 500 2047 2080 33 1.61%
Dax 9622 10051 429 4.46%
Cac 40 4303 4495 192 4.46%
Nikkei 225 15821 16275 454 2.87%
UK 10 Year Gilt Yield 1.347 1.403 0.056 4.16%

Thursday this week will see the release of UK retail sales figures for March and US initial Jobless claims for April.

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