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OPEC agrees to production cut - Video Update
30 Nov 2016
OPEC meeting in focus - AM Briefing
30 Nov 2016
A look-ahead to tomorrow’s OPEC meeting - PM Bulletin
29 Nov 2016
Mixed start for equities; crude lower - AM Briefing
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An introduction to technical analysis - Trading Guide
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Softer tone across risk assets - AM Briefing
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Crude, dollar and equities slip in holiday-shortened session
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ECB warns of uncertain outlook - Video Update
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Gold slumps below key support
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Probability of Dec Fed hike hits 100% - AM Briefing
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US dollar pulls back from highs - AM Bulletin
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Dollar continues to surge - AM Bulletin
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Crude rebounds despite inventory rise - PM Bulletin
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Equity rally slows - AM Bulletin
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US dollar continues to rally - Video Update
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Dollar holds recent gains - AM Bulletin
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Dollar Index tests resistance - PM Bulletin
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Dollar soars as bonds slide - AM Bulletin
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Markets adjust to Trump presidency - Weekly Bulletin
14 Nov 2016
Trump win sees investors rethink their portfolios - AM Bulletin
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10 Nov 2016
Market responds to Trump win - AM Bulletin
10 Nov 2016
US Election fall-out - Video Update
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Markets react to Trump win - AM Bulletin
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US Election – possible outcomes and market reaction - Video Update
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US election result is all that matters now - AM Bulletin
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Election uncertainty spooks investors - Weekly Bulletin
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Non-Farm Payroll look-ahead - PM Bulletin
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Equities mixed ahead of BoE Inflation Report - AM Bulletin
03 Nov 2016
Central bank meetings and election polls - Video Update
02 Nov 2016
FOMC rate decision ahead - AM Bulletin
02 Nov 2016
Bounce-back in precious metals - PM Bulletin
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RBA and BOJ leave rates unchanged - AM Bulletin
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 Wednesday 30 November 2016

OPEC meeting in focus - AM Briefing

 

 

Early moves

-  RBS fails Bank Stress Test

- Crude firmer ahead of key OPEC meeting

Earlier this morning the Bank of England (BoE) released the latest round of stress tests which covered seven major financial institutions. RBS came up short on capital adequacy tests. However, it has already presented the BoE with a revised plan which was approved last night by the BoE’s Prudential Regulation Authority. RBS shares were down around 2% in early trade this morning. The BoE’s stress tests also revealed shortcomings at Barclays and Standard Chartered although the report played these down saying the two banks had already taken measures to address any concerns. Barclays and Standard Chartered were both little-changed in early trade.

Crude is firmer in early trade, making back some of yesterday’s losses. Traders are hanging fire waiting for news from today’s OPEC meetings in Vienna. Investors remain hopeful that the 14-member cartel will agree production cuts. However, there’s as strong possibility that we get a repeat of the Doha meeting in April which broke up in acrimony with Saudi Arabia and Iran at loggerheads. If so, then we should expect crude to retest support around $40 very soon. Even if there is an agreement to cut production (and it will have to be around 1 million barrels per day - just for OPEC) then any significant price rise looks likely to be capped by increased US shale oil output.

The US dollar was a touch firmer across the board first thing. It feels as if it is consolidating now having broken out of a trading range which can be seen quite clearly from looking at the Dollar Index. This had rarely dipped below 94.00 or traded above 100.00 since early 2015. However, the dollar burst through resistance after Trump clinched the US presidency. Inflation expectations have soared as investors price in the prospect of higher inflation and interest rates on the back of Trump’s promises of less regulation, lower taxes and $1 trillion-worth of infrastructure spending.

Stock Index Update

- European banking stocks bounce back

- Investors shrug off lower oil price

European equity markets were mixed in early trade yesterday but turned positive by mid-morning. In some ways this was surprising given the corresponding sharp sell-off crude oil. Typically, weaker oil prices weigh on equities due to the large amount of debt taken on by oil-related companies when crude was trading above $80 per barrel. However, it appeared that equity investors were prepared to ignore any movements in crude yesterday, writing them off as just noise ahead of today’s OPEC meetings in Vienna.

The positive tone carried through to afternoon trade for most of the major European indices. In fact, it was only the UK’s FTSE100 which ended lower on the day. This was due to the index’s heavy weighting towards oil and energy stocks which were pulled down by the sell-off in crude. In contrast, there was a sharp rally in European banking stocks which followed news that the European Central Bank is prepared to increase its purchase of Italian government bonds to control any market turbulence following Sunday's referendum. This helped the Italian FTSE MIB to rally over 2% on the day.

Commodities Update

- OPEC meeting in focus

- Mixed message from precious metals

Crude rose sharply in early trade Wednesday after falling sharply yesterday. Investors are on tenterhooks ahead of today’s long-awaited OPEC meetings. Back in September the 14-member cartel surprised just about everyone when it said it was preparing a framework for production cuts at this meeting. This announcement came just five months after talks to agree to an output freeze broke down in acrimony in Doha. Analysts felt that there was no way that OPEC would suggest that a fresh agreement was possible unless some serious work had already been undertaken. However, there are still concerns that this could be just another cynical attempt by OPEC producers to jawbone the oil price higher for a few months. It’s easy to see how many analysts are saying that OPEC is largely irrelevant these days.

It was a mixed session for gold and silver yesterday. Silver managed to spend most of the session in positive territory but gold struggled and ended the day with modest losses. In some ways this reflected an odd day for the US dollar which lost ground against the euro and sterling, but managed to rally against the Japanese yen. Nevertheless, gold has managed to hold on to support around $1,180 so far and if it can consolidate here then there’s a chance that it could rally into the year-end. Meanwhile, silver has pulled away from support around $16 although it could be argued that this level hasn’t yet been properly tested. But one this is for sure, if the greenback continues to rally from current levels then gold and silver will find it very difficult to make back the losses which followed Donald Trump’s presidential victory.

Forex Update

- Dollar consolidates

It was another mixed session in FX yesterday with little overall direction. Nowhere was this more apparent than in the US dollar which fell against the euro and British pound but rallied against the Japanese yen and Canadian dollar. Overall, this led to a modest pull-back in the Dollar Index which now appears to be consolidating after bursting above long-held resistance (around 100.00) just two weeks ago. The dollar broke out of its trading range soon after Donald Trump clinched victory in the US presidential election. The move came as investors reassessed the outlook for the US economy given Trump’s campaign promises to slash regulation, cut taxes and boost infrastructure spending. All these measures are viewed as both pro-growth and inflationary. Not only are investors expecting the US economy to pick up sharply, but they are also expecting the US Federal Reserve to tighten monetary policy as a result. This is all viewed as dollar-positive. However, this assumes that interest rates lag inflation and don’t choke off growth if it proves weaker than expected. This positive assessment also assumes Trump is able to push his policies through Congress.

Upcoming events

Today’s key economic data releases and events include OPEC meetings in Vienna, the Bank of England’s Stress Test Results, FPC Statement and Financial Stability Report, German Retail Sales, French CPI, Italian CPI, German Unemployment and Euro zone CPI. From the US we have the Core PCE Price Index (the Fed’s preferred inflation measure), Personal Spending, Personal Income, Chicago PMI, Pending Home Sales, Crude Oil Inventories and the Fed’s Beige Book. We also have speeches from German Bundesbank President (and ECB Governing Council member) Jens Weidmann and FOMC voting member Jerome Powell. 

Disclaimer:

Spread Co is an execution only service provider. The material on this page is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by Spread Co Ltd or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

 

Posted by David Morrison

Tagged: AM Bulletin

Category: AM Bulletin


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