Market focus remains centered on developments in the Middle East. Investors will closely monitor whether the strait can remain open.
This week, the repeated opening and closing of the Hormuz Strait once again roiled global markets. U.S. stocks rose across the board, with the Dow Jones Industrial Average gaining 3.19% for the week, the Nasdaq Composite climbing 6.84%, and the S&P 500 index advancing 4.54%. Major European indices also performed well; the UK's FTSE 100 rose 0.63%, Germany's DAX 30 increased by 3.77%, and France's CAC 40 gained 2.00%.
The upcoming week holds several key events. U.S. retail sales data, along with preliminary Purchasing Managers' Index (PMI) figures from the U.S. and the Eurozone, will be closely watched to assess the impact of the Middle East conflict and surging energy prices on consumer and business confidence. However, the primary market focus will remain on Middle East developments. Investors will pay close attention to whether the strait remains open. Additionally, the nomination hearing for Federal Reserve Chair nominee Kevin Warsh is scheduled. The latest earnings reports from Tesla and Intel are also noteworthy.
Assessing US Economic Resilience Upcoming U.S. March retail sales data will be a core focus of U.S. economic indicators. This data will reveal the extent of the impact of energy price spikes triggered by the Middle East conflict on consumer spending, which was already showing signs of weakness before the conflict erupted.
James Knightley, Chief Economist at ING, stated that markets will focus on core retail sales, as spending excluding automobiles, gasoline, building materials, and food services better reflects overall consumption trends. If this indicator shows a month-on-month increase of 0.2%, it would fail to outpace inflation, "implying a third consecutive month of weakening consumer demand amid low confidence and squeezed purchasing power."
Weak U.S. economic data could further increase the probability of Federal Reserve interest rate cuts, especially if oil prices continue to fall. Data from the London Stock Exchange Group (LSEG) shows money markets are pricing in a 63% chance of a Fed rate cut by the end of the year.
Among other indicators, the preliminary U.S. PMI for April, released on the 23rd, will provide a more timely reflection of the impact of Middle East conflict uncertainty and energy price hikes on manufacturing and services activity. Weekly initial jobless claims will also be released on the same day, followed by the final University of Michigan Consumer Sentiment Index for April on the 24th; the preliminary reading released two weeks ago hit a record low.
Another significant event is the nomination hearing for Kevin Warsh as Federal Reserve Chair, scheduled for April 21st local time. Knightley suggested Warsh will likely be questioned about the alignment of his views with those of President Trump, who has explicitly expressed support for lower interest rates.
As earnings season enters its second week, companies to watch include Tesla, Intel, GE Aerospace, UnitedHealth Group, Philip Morris International, IBM, Boeing, American Express, and Procter & Gamble.
Crude Oil and Gold Signs of improved US-Iran talks over the weekend led to a sharp decline in international oil prices. The front-month WTI crude futures contract settled at $83.85 per barrel, down 13.17% for the week. The front-month Brent crude contract settled at $90.38 per barrel, down 5.06% for the week.
The oil market remains highly driven by news flow, with price movements increasingly tied to US-Iran diplomatic progress rather than fundamental factors. Current focus is on when and where US and Iranian officials will meet. Reports suggest negotiations will restart soon.
According to International Energy Agency (IEA) data, oil exports through the Hormuz Strait have fallen by approximately 90%. Supply disruptions have also caused a significant disconnect between futures and spot markets: spot crude prices have surged to nearly $150 per barrel, far exceeding futures prices; meanwhile, refined product prices, particularly for middle distillates, have hit record highs as buyers scramble to find alternatives to Middle Eastern crude.
A weaker U.S. dollar boosted a rebound in precious metals. The May COMEX gold futures contract rose 2.01% for the week to $1,857.60 per ounce, while COMEX silver futures surged 7.09% to $21.73 per ounce.
The sharp pullback in international oil prices has eased global inflationary pressures, leading markets to renew bets on Fed rate cuts within the year. The U.S. dollar index fell accordingly, significantly enhancing the appeal of non-yielding assets like gold and silver.
In India, as the government has not yet officially issued authorization orders for precious metal imports, Indian banks have suspended orders for gold and silver from overseas suppliers, leaving large quantities of precious metals stuck in customs. Without new imports, India, a major global consumer of gold and silver, could face supply shortages.
European April PMI May Disappoint European Central Bank President Christine Lagarde stated on the 14th that the Eurozone economic situation has deviated from the bank's baseline forecast path, but not sufficiently to trigger a rate hike. She believes the Eurozone is currently situated between the baseline and adverse scenarios. Lagarde also explicitly denied any policy bias towards monetary tightening at the ECB, stating the bank's core guidance prioritizes price stability contingent on financial stability.
Preliminary PMI readings for France, Germany, and the Eurozone for April, due next week, will be the most important indicators, offering new clues about business outlook on the economic prospects for the coming months amid high energy prices.
Ángel Talavera, Chief European Economist at Oxford Economics, said in a report that the PMI data will effectively gauge the impact of the Middle East crisis on economic activity. "We expect the PMI to show a drop in activity, with the composite index falling back to the 50 level that separates expansion from contraction," he said. "German activity is likely to remain slightly stronger than France's, but the gap is small. The PMI will also provide important clues about firms' price expectations, which the ECB will monitor closely."
UK March inflation data, released on the 22nd, will be the highlight among a packed schedule of UK economic data this week. This data will show the extent to which recent energy price increases have fed through to overall prices. Markets expect the UK's CPI annual rate to rise from February's 3.0%, with both HSBC and Investec forecasting 3.2%.
This will be the final set of inflation data before the Bank of England's next interest rate decision on April 30th. LSEG data shows UK money markets are pricing in approximately 25 basis points of BoE rate hikes by year-end.
Meanwhile, UK February employment and wage data, due on the 21st, will still hold some reference value, even though the data period precedes the outbreak of the current Middle East conflict. Investec expects the annual growth rate of average weekly earnings including bonuses to slow to 3.5%. This level would be closer to the 3.25% growth rate the Bank of England deems consistent with its long-term 2% inflation target.
Key Events for the Coming Week
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