PMIs a big positive for oil
It’s not just equities lifted by Chinese PMIs, oil is also rallying today on the prospect of a stronger Chinese recovery and resilient global demand. While this was just one survey, the breakdown of the surveys was undoubtedly encouraging, and that’s lifting Brent and WTI in early trade.
We need to see signs of cooling price pressures, and perhaps less heat in the labor market for crude to potentially break higher. Higher interest rates forcing a hard landing remains the main downside risk for crude prices, which has driven the consolidation we’ve seen in recent months, and recent data has only fed those fears.
But with China transitioning well and survey evidence indicating resilient demand, we’re missing the removal of that downside growth risk. We may need to wait a little longer, though, as the data points traders will be most focused on for that are released over the next few weeks. A repeat of January could come as quite a shock.
Creeping higher
Gold is quietly heading for a third day of gains, boosted by a softer dollar today as other currencies react favorably to the Chinese survey data. The yellow metal fell almost 8% from its highs in February, coming close to key support around $1,780-$1,800.
With momentum fading on approach, it would not be a shock to see it pare those losses ahead of crucial US data over the coming weeks. Of course, it’s reliant on yields not spiking again, and some improvement in risk appetite wouldn’t do it any harm either.