Must read: oil prices, China, NatWest, Tesla

Our head of investment rounds up the morning's big news.

GLOBAL MARKETS 

European markets have opened mostly higher,  with the FTSE 100 leading the charge, rising by over 0.6%. Shell (LSE:SHEL) and BP (LSE:BP.) are at the top of the index, each up over 4% after OPEC+ unexpectedly voluntarily reduced output to boost oil prices. 

China’s manufacturing PMI fell to 50 in March, falling short of expectations and declining from February’s 8-month peak. Spain’s manufacturing PMI hit 51.3 in March rising from 50.7 in February, above the key 50 boom-bust divide as more European PMI figures trickle out this morning.

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OPEC+

Oil prices are gaining over 5% after OPEC+ surprised the market on Sunday with voluntary output cuts of around 1.16 million barrels per day starting in May, one day before the key ministerial panel meeting. Turmoil in the banking sector sent oil prices to a 15-month low last month, prompting the cartel to step in to prop up the market.

However, since the mid-March low below $73 a barrel, Brent crude has been regaining ground, and is now back above $84. 

In October last year OPEC+ agreed to cut oil output by 2 million barrels per day. But the United States has been opposed to output reductions, given the pressure from high oil prices last year on consumers and businesses. 

While OPEC+ has intervened to limit supply and support prices, the demand outlook remains uncertain. On the one hand, the opening up of China’s economy is releasing a wave of pent-up demand. However, that tailwind is likely to be tempered by weaker demand outside China as the global economy cools. Plus, demand could also soften if there are further fears of contagion from the banking sector volatility.

NATWEST 

The British government is extending its trading plan to sell the remaining 41.5% stake in NatWest Group (LSE:NWG) by two years until 11 August 2025. In last month’s budget, the government confirmed it aims to fully privatise the lender, which was bailed out during the global financial crisis, by 2026. RBS was rebranded NatWest in 2020 as the bank tried to distance itself from previous scandals as well as its near-collapse in 2008. 

The recent banking sector turmoil has sent shares in NatWest down by more than 10% over the past month. This complicates the picture for the government which is trying to offload its stake at a time when investors are feeling nervous towards the sector.

If the banking sector crisis fades over the coming weeks, we could see opportunistic buyers return to the market, picking up shares in NatWest and others at a discounted price. However if further cracks in the system are revealed, banks could come under renewed selling pressure.

TESLA 

Tesla Inc (NASDAQ:TSLA) delivered 422,865 vehicles in the first quarter. This was still a record quarter with 36% growth year-on-year. Elon Musk said in January he is aiming for 2 million vehicle deliveries this year, up 52% versus last year. 

Tesla has been cutting prices and it appears to be working out well. Global Tesla prices have been reduced by as much as 20% to tackle the weaker demand backdrop with rising interest rates, and a softening consumer outlook. There is growing speculation that Tesla could cut prices again to bolster demand, particularly in China’s intensely competitive EV market.

However, there are concerns longer-term about whether Tesla can maintain its dominance amid the onslaught of EV competition coming to market. There are also worries that Elon Musk has been focusing more on Twitter instead of Tesla since the acquisition last year, sparking nervousness he is spread too thinly. 19 April is the next key date for Tesla when it reports first quarter earnings. 

After last year’s tech wreck, which saw Tesla shed 65%, the stock is up over 90% year-to-date. However, there is still a long way to go to reclaim the highs from November 2021 above $409 a share, almost double Friday’s close at $207.