For the most part, stock markets have been holding steady overnight ahead of a series of big announcements due through the morning today that could have a significant impact on trading. The Nikkei
fell 2.4% as the Japanese Yen rallied, putting pressure on exporters. European indices like the FTSE and Dax are up slightly today. Spain’s IBEX has popped 1.0% on the back of a very strong job gains in that country ahead of this month’s election. US indices are down marginally ahead of today’s ADP payrolls report, a key update on the job market along with tomorrow’s nonfarm payrolls for Fed meeting speculation.
Brent and WTI crude have been holding overnight in the upper half of a $48.00 and $50.00 ahead of today’s OPEC meeting. There has been some talk that was some talk that the cartel may try to bring back a production quota after abandoning previous policy in December. If they do, it's likely to be higher than before as OPEC production has increased significantly since then. We could hear some calls for cuts from some struggling smaller members particularly Venezuela, but really, it’s Saudi Arabia and Iran that need to agree in order to bring everyone else into line just as their failure to agree scuttled hopes of a production freeze at the Qatar meeting back in April. Saudi Arabia with a new oil minister appear open to a new ceiling but Iran remains opposed while still ramping up production following the lifting of sanctions earlier this year. This time around nobody is expecting any major news, particularly with the market rebalancing and the price rising in recent months.
Any development could be seen as a surprise while comments from OPEC member countries could spark short term swings. The oil sensitive CAD and NOK are trading lower relative to USD so far today similar to declines in other resource currencies like AUD and NZD. Later this morning, weekly US DOE oil and gasoline inventories plus EIA natural gas storage are all due with traders expecting a smaller drop in stockpiles for crude than last week. With all of this news on the way, it could be a big day for trading in oil, oil currencies and energy stocks.
Thursday morning also brings an ECB meeting plus a number of opportunities for comment from ECB President Draghi ahead of this month’s UK Brexit referendum and Spanish election. Traders may look for comments on whether QE and negative rates are working to stimulate the Eurozone economy or not. Spain posted really strong 119K job growth last month but Draghi may still join the OECD from yesterday in calling for more fiscal measured to boost economies with monetary policy
nearing the limits of what it can do. Also traders may be watching for whether Draghi jumps on the bandwagon or avoids the temptation to threaten the UK ahead of the Brexit vote (threats which are increasingly being ignored by the markets) or if he makes any prediction on how a Brexit vote could impact the Eurozone. GBP has stabilized against both USD and EUR today as a trading correction following a series of polls showing the Leave side gaining momentum and a really close race overall runs its course.
US ADP payrolls are also due Thursday with traders looking to employment for confirmation of a strong market. The only thing is that ADP and nonfarm payrolls could be distorted by a strike at Verizon which put 35,000 workers off the job and on the picket lines temporarily. Considering that employment growth could slow as the US nears full employment, I suspect it would take a result below 100K to get the Fed to reconsider its rate hike plan. The street is at 173K I’m guessing 150K similar to last month.
Significant announcements released overnight include:
Spain unemployment change (120K) vs street (104K) vs previous (83K)
UK construction PMI 51.2 vs street 52.0
Eurozone producer prices (4.4%) vs street (4.1%)
Australia retail sales 0.2% vs street 0.3%
Australia trade balance ($1.5B) vs street ($2.1B)
Japan consumer confidence 40.9 vs street 40.1
Announcements due later today include:
12:45 pm BST ECB meeting decision no change to interest rates or QE expected
1:30 pm BST ECB Draghi press conference
3:00 pm BST BST ECB Draghi speaking
8:15 am EDT US ADP payrolls street 173K vs previous 156K
8:30 am EDT US jobless claims street 270K
2:00 pm BST Bank of England Carney speaking
3:00 pm BST OPEC press conference
10:30 am EDT US natural gas street 82 BCF
11:00 am EDT US DOE oil inventories street (2.5 mmbbls) vs previous (4.2 mmbbls)
11:00 am EDT US DOE gasoline inventories street (.35 mmbbls) vs previous 2.0 mmbbls
8:35 am EDT FOMC Powell speaking
1:00 pm EDT FOMC Kaplan speaking