Markets Await Data 

Slightly sluggish start for equities on Monday morning as traders brace for the US to return to top flight action after the Thanksgiving holiday and shortened week; whilst a raft of economic data is due in the coming days. London and Frankfurt were a bit lower, Paris a bit higher in early trade after a generally downbeat Asian session, where the tone was set by another decline in Chinese industrial profits. US stock markets rose in the holiday-shortened week, the fourth week of gains on the bounce.   

Gold Glittering 

Gold rose to its highest in six months with Treasury yields and the dollar in a bit of a post-Thanksgiving funk. Too much turkey weighing – the yield on the 10yr was still below 4.5%, whilst the DXY futures tested the 103 support as gold touched $2,018, its best since May, before pulling back a touch.  

Sterling Up 

The weaker dollar helped sterling rally to its best in two months against the greenback, with GBPUSD holding 1.26. It follows a strong rally on Friday, taking its monthly gains to almost 4%, after an unexpectedly strong UK composite PMI for November indicated surprising resilience in the UK economy. Maybe there was some uplift from the Chancellor’s Autumn Statement. EURUSD also nudged up but came up short of last week’s 3-month high.   

Inflation Data 

Eurozone, Australian and US inflation will be eyed for the central bank pause narrative. Eurozone headline inflation dipped from 4.3% in September to 2.9% in October, raising hopes that the worst is over and the ECB can stay on pause mode. ECB Governing Council member de Guindos has warned however that he expects a temporary rebound in inflation in the coming months. US Core PCE inflation for October is also due up having softened to 3.7% in September – slowing but not much. Meanwhile we have Chinese PMI data to consider, as well as Japanese industrial production and a second reading on US third quarter GDP among the data releases in this busy week.  

Oil and OPEC 

A delayed OPEC+ meeting seems closer to achieving a compromise, with sources indicating that Nigeria and Angola are coming in line with the cartel. They won’t allow a meeting to breakup without a deal on 2024 production quotas so if it’s going ahead then we can be pretty sure they have already compromised. It seems likely that OPEC and its ally Russia will extend production cuts into next year – the question is whether they have the will to deepen them a bit more, and can persuade some other members to help out. As noted on Friday though, record US production and rising output from Brazil and Guyana mean OPEC cannot sway the market into a deficit quite so easily – non-OPEC is filling the gap and the market will be in surplus next year whether OPEC extends or not. Crude prices fell again this morning, drifting down towards last week’s lows, which were struck when OPEC said it would delay the meeting from Sunday to Thursday. Lots of volatility in crude in recent days may continue as the meeting approaches.  

WTI – sellers losing some steam?