NATIXIS OIL OUTLOOK 2019-20

Macroeconomic environment Eurozone: industrial producer prices point to a build-up in pressure going forward, with a stronger-than-expected 4.2% yoy increase in August (consensus: +3.9%), while the July estimates came in for a sharp upward revision from 4.0% to 4.3% yoy . Both readings constitute the highest levels since April 2017. Equities After Monday’s respite, European equity indices weakened in the face of the Italian risk. The IBEX underperformed, while the FTSE MIB put up a slightly stiffer resistance than the CAC. In Europe, defensive sectors outperformed, with utilities and energy out in front, whereas industrial and real estate brought up the rear. V2X closed above 15.4%, whereas the VIX is still camping below 12%. Emerging indices struggled, with another bout of weakness by emerging currencies (Indonesian rupiah down 0.9% against the greenback). Bond markets / Derivatives Risk-off mood, with a major underperformance of Italian bonds amid budget concerns. The 10Y BTP reached its highest level since 2014, no contagion to the other peripheral countries, as shown by Bonos and OT outperformance over BTPs, this is confirm when we look to the CDS market. Money markets / Central banks Fed Chairman said he sees no need to drop the current plan of a gradual approach to raising interest rates. He does not see evidence that the labour market is at risk of overheating and added that the economy has a “remarkably positive outlook”. FX Against the backdrop of renewed risk aversion stoked by uncertainties over Italy, the US dollar rebounded against all currencies, save the Japanese yen. Sterling recorded the sharpest fall ahead of Theresa May’s speech to the Conservative Party Conference today. The euro tested 1.1525 against the US dollar. Despite risk aversion rearing its head, the Argentine peso and Brazilian real appreciated sharply, the USD/ARS easing to 38.16 and the USD/BRL to 3.92. By contrast, the South African rand and Indonesian rupiah weakened. Commodities Gold and silver prices witnessed a strong performance following the European Commission’s warning of a Greek style crisis in Italy. Meanwhile, c opper was flat as the picture remains contradictory : f alling stocks are being countered by worrying demand signals.