MORNING ROLL CALL
OPEC finally finds its sweet spot, for light sweet crude.
It’s always a relief for: analysts, economists and market commentators when a huge looming economic event, highlighted on the economic calendar, is finally over. The narrative, building up to this particular event, had become repetitive and tiresome; “will they, won’t they, by how much, who’s going to take their ball home and refuse to play?”
The date with destiny in Vienna (for OPEC members) arrived. After the tortuous week or so of constant market whipsaws, as a consequence of the rumours and disagreements, the movers and shakers in the cartel got down to business and agreed to reduce production by circa 1.2 million barrels a day, to 32.5 million a day. WTI oil exploded to the upside rising by, at one point in the afternoon trading session, circa 10% on the day. Benchmark Brent crude actually surpassed $50 a barrel for the first time in a month.
So the OPEC cartel members have found their perfect ‘Goldilocks’ temperature and range for oil price, at least for now. Not too hot, not too cold and just about edible for two of the three bears, Iraq and Iran, with Russia, the other bear, not in the exclusive OPEC club. It’s fascinating to note that OPEC members only account for circa 40% of global oil production, so what about the other 60%, including Russia and the USA who are not in that gang, what’s their take on the events in Vienna? Perhaps it’s the lack of proven reserves for the 60%, that ensures OPEC members appear to dictate global oil price. OPEC members apparently have approx. 80% of the globe’ proven reserves.
It’s “NFP day” (non farm payrolls) this coming Friday, when the USA government publishes its jobs data for the month. The ADP Research Institute private jobs report is always the precursor to this event and generally acts as a reliable weather vein, as to which direction the USA jobs market is heading in. ADP data released on Wednesday, stated that companies added their most workers since June, 46,000 more than economists had forecast. Analysts will now be expecting the NFP number to be in line with expectations; circa 175K jobs created in November. However, given seasonal job additions, this number could be greater, therefore traders should be mindful of this possibility during the publication of the NFP jobs data, at 1.30pm London time on Friday 2nd.
Equity markets were relatively quiet throughout the two trading sessions on Wednesday; the DJIA closed up 0.01%, S&P down 0.27%, the Nasdaq slipped 1.1 percent, the U.K. FTSE closed up 0.17%, with the DAX in Germany up 0.19%.
Base metals rebounded in London (led by copper’s advance) after the London Metal Exchange Index slumped by circa 3.4 percent during Tuesday’ sessions, which was the largest single day fall in over a year. Gold tumbled by 1.3 percent to $1,172.84 an ounce in the spot market, breaching the lowest level witnessed since February.
Bloomberg’s Dollar Spot Index, which tracks the greenback versus its 10 major peers, rose by 0.5 percent, its gain this month is now 3.9 percent, the best return since September 2014. Yen slid 1.8 percent to 114.38 per dollar, reaching the weakest point seen since March 10th. Yen also sold off sharply versus the majority of its peers throughout Wednesday’s trading sessions, whilst commodity currencies, such as the Aussie and Canada’s Loonie, enjoyed significant gains in correlation with oil price movements.
Economic calendar events that could impact on market conditions on Thursday 1/12/2016
There’s a raft of PMI data, courtesy of Markit Economics, published on Thursday, between 8.15 am and 9.30 am London time, of which traders should remain vigilant. Perhaps the most prominent releases are: Germany’s manufacturing PMI, expected in at 54.4 (no change), the UK’s expected in at 54.3 (no change) and the overall European manufacturing PMI, expected in at 53.7 (no change). Naturally any deviation from those predictions may cause currency volatility in both euro and sterling.
The euro area’s unemployment rate is published at 10.00 am London time and the rate is expected to remain constant at 10%. Quarterly and yearly figures for Italy’s GDP are also published at 10.00 am, annual GDP (for the third quarter) is expected in at 0.9%, no change.
In the afternoon session attention turns to data releases concerning the USA. Firstly, at 1.30 pm London time, there’s the weekly initial unemployment claims, expected in at 253K, up marginally. Thereafter, the next high impact news event (at 15.00 pm) will be the ISM manufacturing index, predicted to register at 52.4, an increase from the previous 52.9. The USA also publishes data on construction spending at 15.00 pm, these are month on month figures. The prediction by the analysts polled, is for a rise of 0.6%, from a previous fall in October of -0.4%.
