OPEC+ countries continued to reduce oil production. Indices have again renewed historical highs

This week’s ECB monetary policy meeting will take place on Thursday. No changes are expected as the ECB has dismissed talk of rate cuts, saying it needs more evidence that inflation is on track to return to the 2% target. Eurozone inflation data on Friday supported the ECB’s cautious stance. Consumer price inflation slowed less than expected in February, and core inflation also slowed more slowly than expected. February Eurozone CPI declined to 2.6% y/y from 2.8% y/y in January. The core CPI for February fell to 3.1% y/y from 3.3% y/y in January, the slowest growth rate in almost two years. The ECB is concerned that wage inflation is still too high and risks fueling price pressures for longer.

Gold held near $2,080 an ounce on Monday after rising nearly 2% in the previous session, helped by a weaker dollar and lower Treasury yields amid weaker US economic data. Silver also followed gold prices, but it is worth realizing that silver has negatives. The US manufacturing sector business activity index for February contracted more than expected, and construction spending for January unexpectedly fell, a negative sign for demand for industrial metals.

Oil prices rose on Friday and hit a one-week high as traders awaited OPEC+’s decision on supply agreements for the second quarter and weighed fresh economic data from the United States, Europe, and China. Brent crude added about 2.4% for the week after changing contract months, while WTI crude prices rose more than 4.5%. A decision by the Organization of the Petroleum Exporting Countries on extending production cuts is reportedly expected in the coming week. On Sunday, Saudi Arabia and Russia agreed to extend voluntary oil production cuts of 2.2 million bpd for the second quarter. Iraq and the UAE will continue to cut production by 220,000 bpd and 163,000 bpd, respectively, through the end of June. Expectations that other OPEC+ countries will continue voluntary production cuts until the second quarter of 2024 are bullish for prices. Geopolitical tensions in the Red Sea will also continue to support prices.

Asian markets traded flat last week. Japan’s Nikkei 225 (JP225) jumped by 1.50% for the week, China’s FTSE China A50 (CHA50) declined 1.07% last week, Hong Kong’s Hang Seng (HK50) ended the week down 0.57%, and Australia’s ASX 200 (AU200) ended the week positive 1.33%. Most Asian stocks fell slightly on Monday, mainly due to caution ahead of China’s national congress in 2024. During the event, the government will announce a growth target 2024 and outline a strategy to stimulate economic recovery. Beijing is forecast to keep the growth target at around 5%, unchanged from 2023, as the policy path will likely remain favorable to growth.

The Nikkei Index surpassing the 40,000-point mark allowed it to break an important psychological barrier, a trend that could favor further growth shortly. Signs of resilience in the Japanese economy and softer inflation also helped extend the Nikkei (JP225) rally. This week will focus on key inflation data from Tokyo, which usually serves as an indicator for the broader Japanese economy.

Australia’s ASX 200 Index was unchanged at market open after hitting record highs last week. Key Australian GDP data will also be released this week.