Crude oil rallied for a second straight Thursday consolidating then building on its initial Post-OPEC decision grains. Although details are sketchy and a lot can happen between now and the November 30th OPEC meeting when real decisions on individual country production levels are due, the street appears cautiously optimistic that key countries were still speaking to each other at the end of the meeting.
Signs that the supply war that crushed crude over the last two years may be ending, along with falling US inventories continues to provide support in the $40-50 range. Getting above $50 without a formal deal could still pose a challenge in the near term particularly since sustained moves above that level could encourage US shale producers to bring idled production and exploration plans back on line.
For now, the rally in crude oil and a sense that the worst may be behind us is boosting oil sensitive currencies like CAD and RUB while also sending energy stocks higher. On Wednesday, the energy sector was all that put markets into the green while today it helped to cushion market losses. Oil weighted indices like the FTSE
and S&P/TSX were able to post gains while indices with less resource exposure like the Dow and the Dax fell on the day.
Further indications from FOMC regional Presidents favouring a rate hike this year like Atlanta’s Lockhart and Philadelphia’s Harker along with better than expected US economic data today (goods trade, GDP, pending home sales and jobless claims all beat the street) combined to remind traders that a December rate hike remains on the table. While the US election impact has gone quiet for now, it looks like a Clinton victory is fully priced in leaving the door open to a correction should the Republicans fail to give up and keep the race close. USD picked up relative to other majors today indicating expectations shifting toward one rate hike this year and more in 2017.
We’re heading into the last trading day of the quarter so we could see traders adjusting positions and preparing for next week’s PMI and payroll reports. Today could be a particularly quite active for JPY and the Nikkei with the main basket of monthly data due. Yesterday the Yen fell on a poor retail sales report, today traders have employment, inflation, housing, construction, spending and more to potentially react to.
Also today we get the first manufacturing payroll report China Caixin with US Chicago PMI due in the morning. These reports could kick off PMI economic speculation trading heading into the weekend. AUD and NZD could be active around the China news and New Zealand business surveys.
Deutsche Bank sold off in the US afternoon on reports that hedge funds and other counterparties were starting to withdraw excess cash or move some trading elsewhere. This could impact trading on European exchanges early Friday.
Friday may also be a big day for CAD trading with monthly GDP data for July due. The Bank of Canada had been hoping for a summer bounce in the Canadian economy but recently suggested July may have been slow. A miss could put pressure on the central bank to cut interest rates later this year. Ongoing swings
in the oil price may also impact trading in the loonie.
There have been no major announcements after the US close today
Significant announcements released overnight include:
US Q2 GDP update 1.4 % vs street 1.3% and previous 1.1%
US Q2 personal consumption 4.3% vs street 4.4%
US Q2 core PCE inflation 1.8% as expected
US advance goods trade balnce ($58.4B) vs street ($62.2B) vs previous ($59.3B)
US jobless claims 254K vs street 260K
US pending home sales 4.0% vs street 2.6%
US natural gas 49 BCF vs street 55 BCF
Germany unemployment chnge 1K vs street (5K)
Germany unemployment rate 6.1% unchanged as expected
Germany consumer prices 0.7% vs street 0.6% vs previous 0.4%
Upcoming significant economic announcements include:
(Note: 11:30 am in Sydney/Melbourne is currently 1:30 pm in Auckland, 4:30 pm in Vancouver, 7:30 pm in Toronto/Montréal, 12:30 am in London and 8:30 am in Singapore)
9:30 am AEST Japan unemployment rate street 3..0%
9:30 am AEST Japan household spending street (2.1%) vs previous 0.5%
9:30 am AEST Japan consumer prices street (0.5%)
9:30 am AEST Japan core CPI street 0.2%
9:50 am AEST Japan industrial production street 3.4%
3:00 pm AEST Japan housing starts street 7.1%
3:00 pm AEST Japan construction orders previous (10.9%)
10:00 am AEST NZ ANZ activity outlook previous 33.7
10:00 am AEST NZ ANZ business confidence previous 15.5
11:45 am AEST China Caixin manufacturing PMI street 50.1
7:00 am BST Germany retail sales street 1.8%
7:45 am BST France consumer prices street 0.4%
9:00 am BST Norway unemployment rate street 2.9% vs previous 3.1%
9:00 am BST Italy unemployment rate street 11.4%
7:00 am BST UK Nationwide house prices street 5.0%
9:30 am BST UK GDP update street 2.2%
10:00 am BST Eurozone unemployment rate street 10.0%
10:00 am BST Eurozone consumer prices street 0.4%
10:00 am BST Eurozone core CPI street 0.9%
8:30 am EDT US personal income street 0.2%
8:30 am EDT US personal spending street 0.1%
8:30 am EDT US Core PCE inflation street 1.7%
8:30 am EDT Canada GDP street 1.0%
8:30 am EDT Canada industrial prices street (0.1%)
8:30 am EDT Canada raw material prices street (1.0%) vs previous (2.7%)
9:45 am EDT US Chicago PMI street 52.0
10:00 am EDT US consumer sentiment street 90.0
1:00 pm EDT US Baker Hughes drill rig count previous 511
1:00 pm EDT FOMC Kaplan speaking
9:00 pm EDT China manufacturing PMI street 50.4
9:00 pm EDT China non-manufacturing PMI previous 52.5
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