The Thailand SET opened with a 0.84% gap up on Thursday and moved higher to close at 1,570, as the share prices of companies in the energy sector, lead by PTT, Thailand’s largest fully integrated gas and oil company, surged in response to the big jump in crude oil prices. The spot price of Western Texas Intermediate Crude (WTIC) was quoted on the Chicago Mercantile Exchange (CME) on Wednesday as high as U.S. $56.69 per barrel, up 9.46% from the last Friday close of U.S. $51.79. The rally faded on Friday as local institutions took profits and the Thailand SET closed at 1,566.85, up 1.23% for the short trading week.

A mixed bag of weak U.S. economic data put downside pressures on the U.S. dollar index (DXY), a weighted geometric index of the value of the U.S. dollar relative to a basket of six major currencies, as the currency market is re-pricing the timing of the first rate hike. Crude oil, which is traditionally traded in inverse correlation with the U.S. dollar, surged in response to the weak U.S. currency.

The U.S. Commerce Department said on Monday that U.S. retail sales edged up 0.9% in March, the first gain in four months but still missing the Wall Street consensus forecast of 1.1%. Retail sales excluding autos rose just 0.4%, also missing the forecast of 0.7%. The International Monetary Fund (IMF) said on Tuesday that they revised their growth forecast for the U.S. to 3.1% this year and next, from 3.3%, citing currency headwinds that restrain growth.

The WTIC crude price shot up 3.36%, to U.S. $55.08 per barrel, on Wednesday after the U.S. Energy Information Administration (EIA) weekly report showed that crude oil inventories had a build of 1.3 million barrels to a total of 483.7 million barrels, the 13th consecutive week of builds and a higher total than at any other time in at least 80 years. Analysts had expected a build of about 3.25 million barrels. 

Last week, Goldman Sachs sent out a research note saying that both U.S. oil production and stockpiles of stored inventories could peak in April and shrink from May until August, amid a record drop in U.S. oil drilling rigs. It remains to be seen whether Goldman made a right call as it seems that Organization of Petroleum-Exporting Countries (OPEC) keeps pumping oil, while non-OPEC countries are cutting their capital expenditures and production.

OPEC said on Thursday that its March production jumped 810,000 barrels per day (bpd) to 30.79 million bpd, or a 1.58 million bpd increase, compared to the February production of 29.21 million bpd. 

The U.S. dollar index took another 0.92% hit on Thursday after Mr. Dennis Lockhart, president of the Federal Reserve Bank of Atlanta and known a policy hawk, said that the data available for the first quarter of this year have been notably weak and “heightened uncertainty” about economic growth makes waiting to hike interest rates more feasible. Mr. Lockhart’s comment was made on the heels of the release of the Federal Reserve’s beige book, an anecdotal roundup of business conditions at the 12 Fed districts, showing U.S. economy is still growing but slowly.

The USD/THD exchange rate inched 0.6% lower to close at 32.35 baht per dollar, while the 10-year Thailand Government bond, now yielding at 2.66% at the close on Friday, tumbled 2.92% for the week. One may want to pay attention on this bond yield red flag, as the 10-year Thailand Government bond yield is now approaching the 52-week low of 2.6%, because a sinking bond yield is a sign for a flight-to-safety bid.

From our technical viewpoint, the bulls seem to be in full control as the Thailand SET just broke out from the downtrend channel and is now above the 50-day moving average. The projected price after the downtrend channel breakout is 1,626, determined by adding the width of the channel to the point of breakout. Since the market doesn't move straight up, the Thailand SET needs to breakout from the rising wedge pattern and the two head resistances at 1,588 and 1,619. The 1,600 level remains the projected price after the falling wedge breakout, determined by adding the width at the top of the pattern to the point of breakout.

The potential downside risks ahead are currency fluctuations, the Greece debt crisis drama and China’s new trading regulations. Greece has their 1 billion euros IMF debt repayments coming due in early May. IMF Chief Christine Lagarde already warned Greece not to skip the IMF debt payment or else the country would be put into the club that includes Zimbabwe, Somalia and Sudan, countries that hold the dubious distinction of having fallen into arrears with the IMF.

The S&P ratings agency already downgraded Greece’s long and short-term credit ratings this week, to CCC+/C from B-/B, citing “unsustainable” debt and other financial commitments. The ratings could drop to C/C, meaning a default is imminent if Greece skips the IMF debt repayments. 

The Chinese government said on Friday that its new trading regulations will allow fund managers to lend stocks for short-selling and expand the number of stocks investors can short, to increase the supply of securities in the market. Retail investors in China have been borrowing record amounts of money to buy stocks on margin, pushing trading volumes to the bubble stage. 

The stocks listed on the Shanghai Exchange have an average price-to-earnings multiple, or P/E, of 220, about 11 times that of the S&P 500 or the Thailand SET. The China H-Share index futures Apr 15 traded on the Hong Kong Exchange (HKE) fell 4.77%, to 14,413 at the close on Friday, which triggered the sell-off in the European and U.S. markets. The sell-off is expected to spill over into the Asian markets on Monday.