Market movers today
OPEC will meet today to discuss potential production cuts in 2019. A press conference is scheduled for 13:00 CET, which will be monitored closely amid soaring oil price volatility this autumn, see the chart (source: Bloomberg) . The final rounds of speculation indicate an agreement on output cut next year, which could last the whole of 2019, but there seems to be no deal yet on the size of the cut. Furthermore, Libya and Nigeria seem likely to be included in a deal this time around.
If we are right in our call for production cuts in the magnitude of 1.3mb/d for OPEC+, it would erase OPEC+ output gains from this year. It would pave the way further for a short-term rebound in the price on Brent crude above USD70/bbl, which would support oil exporting currencies such as CAD and NOK.
In terms of the economic data calendar, today is rather light, as we await tomorrow’s US labour market report, euro area GDP and wage numbers.
However, today the ADP job report is due as well as US initial jobless claims , which could be an indicator of tomorrow’s non-farm job report even if the predicting power of the ADP report has been poor lately. Finally, the Brexit debate in the House of Commons will continue and overnight we will get Chinese FX reserves data.
In Scandi markets, the SCB release Swedish house prices.
Selected market news
Risk sentiment remains choppy with Asia trading in the ‘red’ this morning. The latest souring in risk sentiment relates to renewed trade uncertainty as the CFO of Chinese giant Huawei Technologies, Wanzhou Meng, has been arrested by Canadian authorities on extradition claims from the US. The arrest rekindles questions on the outlook for a US-China trade deal even if constructive comments on both sides of the Pacific calmed markets yesterday. Also contributing to market volatility has been the renewed focus on the US yield curve inversion amid US 10Y Treasury yields falling towards 2.88%.
Souring risk sentiment has weighed on the oil price , which blurs the picture of what is priced into oil markets in terms of an OPEC+ production cut. Meanwhile, added political pressure from US Donald Trump has clearly curbed gains. Yesterday, he tweeted: ‘Hopefully, OPEC will be keeping oil flows as is, not restricted. The world does not want to see, or need, higher oil prices ‘. The added pressure should be seen in light of worsening US-Saudi diplomatic relations following the killing of journalist Khashoggi in October.
As expected, the Bank of Canada left policy rates unchanged at yesterday’s ‘interim’ meeting. Meanwhile, the statement was softer than expected as it emphasised that the latest GDP revisions by Statistics Canada could mean ‘there may be additional room for non-inflationary growth’. In other words, capacity utilisation is likely to be lower than the bank previously expected. CAD moved lowered on the announcement as it challenges market pricing of a March hike. The next monetary policy report is due on 9 January.
