20, March 2017

G-20 meeting indicates that global protectionist sentiment intensified

On Friday, March 17, most US equity indexes fell slightly, investors were waiting for further drivers from the G-20 summit before continuing the trade. The decline in US banking sector continued, having lost about -1%, after the meeting of the Federal Reserve System. On the contrary, the key European indices slightly gained on Friday. Financial sector of the region and automakers were under pressure during the day.

Today, most European markets opened in the red and continue to decline, after the meeting of finance ministers and heads of central banks on the fields of G20. The two-day G-20 meeting, held last week in the German city of Baden-Baden, demonstrated the differences in opinion on a number of fundamental issues of the participating countries. The greatest contradictions arose in the issue of the need to preserve the free trade regime. The US delegation refused to include an item on the rejection of protectionist measures in the final document of the meeting.

In his speech, the US Treasury Secretary stated that the existing trade agreements put the US at a disadvantage, repeating the recent rhetoric of President Trump. The representatives of the Chinese delegation, as well as the German Chancellor were, more than others, defending the existing trade regime, as they are the representatives of the most export-oriented economies. German Chancellor Angela Merkel and Japanese Prime Minister Shinzo Abe tried to protect free trade. Leaders insisted  on the signing of a new trade agreement between Japan and the European Union, distancing themselves from the protectionist rhetoric coming from the Trump’s administration.

Today, investors are focused on the elections in France, where the first presidential debate will take place. Opinion polls show that independent candidate Emmanuel Macron can bypass the leader of the far right Marine Le Pen in the first round of voting.

Germany's producer price index rose by 0.2% in February from the previous month, with a growth forecast of 0.3%.

The FOREX currency market reacted to the news from the G-20 fields with a slight weakening of the US dollar and the continuation of the strengthening of the Japanese yen.

Oil prices fell on Monday, amid data on the number of drilling rigs in the US and the preservation of stable supplies from the OPEC countries. On Friday, Baker Hughes Inc. Reported an increase in the number of drilling rigs in the US by 14 units last week, bringing the total number of drilling rigs to 631, the maximum since September 2015. The oil market is under pressure amid absence of positive drivers for the oil market. This week the market will focus on the meeting of the OPEC + committee (March 25-26). Against this background, it is possible that Brent quotes will return to the area of ​​$ 53.40.

The previous week ended with a slight gains for world stock markets. The results of the March meeting of the Federal Reserve and economic forecasts are the main factors of a positive market sentiment. Taking into account G-20 results and Fed meeting, we can expect futher gains of the world currencies against weaker US dollar. This week, the focus will be on Fed official’s speeches, including the head J. Yellen. Macroeconomic data will define the trading sentiment as well on the number durable goods orders, home sales in the US, as well as preliminary data on business activity indices.