Vestle Daily Analysis - No OPEC Agreement, Meeting Continues On Friday, US NFP, EU GDP
The US dollar traded almost unchanged against other major currencies on Thursday, as seen in the performance of the US Dollar Index (USDX), which measures the performance of the greenback against six other major currencies. Emerging market currencies showed a mixed picture against the dollar, with the South African rand (ZAR) weakening significantly and pushing above the level of 14 in the USD/ZAR for the first time in more than two weeks. The move was explained by analysts with the renewed increase in tensions between the US and China. Other emerging market currencies were however differently affected, with the Mexican peso (MXN) recovering after briefly hitting a 5-months low.
Oil prices were again lower despite a significant draw on crude oil stockpiles according to EIA data, as the OPEC and associated countries, especially Russia, failed to produce an agreement on production cuts at their meeting in Vienna and are expected to continue their talks on Friday.
Equity indices traded mixed on Thursday with a short-lived spike up in the Volatility Index (VIX) to the highest level since October. Asian and US indices futures were trading lower on Friday morning after the markets opened, while European indices were trading higher.
Cryptocurrency values fell in case of even the most popular cryptocurrencies like Bitcoin or Ripple by over 10% within 24 hours by Friday morning, bringing the value of Bitcoin to the lowest point since September 2017.
On Friday the EU will release its GDP data for Q3. In the UK the Halifax house price index (HPI) will be published. In the US the nonfarm payroll (NFP) for November will be released, together with the unemployment rate that is expected to stay unchanged at 3.7% and data on average hourly earnings, average work week, wholesale trade, consumer credit and the University of Michigan consumer sentiment survey. Canada also releases data on the employment level in the country and the unemployment rate.
The Euro managed to improve against the dollar on Thursday, again hitting above the 1.14 level for the EUR/USD pair. German manufacturers’ orders were reported with a stable growth of 0.3% m/m above expectations. US data was mixed with the ADP employment report was slightly above expectations at 179 thousand more employed in surveyed private sector companies. However the jobless new claims number with 231 thousand (expected 231 thousand) and the trade balance deficit for October at $-55.5 bn. (expected $-55.0 bn.) were worse than anticipated.
On Friday the German and French industrial production statistics for October will be released. France also releases its trade balance, followed by the Italian numbers on retail sales. Then the European Union publishes the gross domestic product (GDP) for the third quarter.
While other European stock indices were also seen struggling, the Germany 30 index was one of the weakest performing European indices amid the sell-off in equities, falling to the lowest level since 2016. The index extended its decline on Friday morning with the announcement of a declining industrial production level at -0.5% taking the markets by surprise.
Shares of the medical company Fresenius traded at times even down by more than 10% on Friday morning after the company announced that it would not meet the set targets for 2020.
Next week in Germany the trade balance and consumer price index (CPI) data will be released.
Oil had another volatile day on Thursday with a downward movement that extended the losses on Friday morning. The first draw on crude oil inventories according to data released by the Energy Information Agency (EIA) on Thursday failed to give a sizable upward push to oil prices, despite the draw of 7.3 million barrels being significantly higher than expected by analysts. On the other hand distillate stockpiles increase more than expected by 3.8 million barrels and gasoline inventories by 1.7 million barrels.
The OPEC meeting on Thursday was a key event for the oil markets, with the meeting being contrary to expectations being concluded not by a press conference with an announcement of production cuts, but by the decision to extend the meeting until Friday, as they are still reportedly awaiting support from Russia for such a deal. Saudi Arabia’s energy minister was quoted after the meeting that he was “not confident” that such an agreement was within reach.
Besides the continuing OPEC meeting for Friday the release of the US Baker Hughes oil rig count is expected, which indicates the number of currently operating oil rigs in the United States.
In another day of volatile trading, US equity indices ended the day mixed, with gains seen in the NASDAQ (US Tech 100), while other major indices except for the small-cap index US 2000 finished the day also marginally higher in the extended trading session.
Some of the most sizable losses were seen in the energy sector (US Energy ETF -1.86%) given the again falling oil prices. The financial sector (US Financials ETF -1.50%) also saw some sizable losses, with the inversion of the yield curve given as one possible factor for the decline. Shares of Citigroup (-3.70%) had an especially negative performance, reaching the lowest point since April 2017. This comes as the company’s CF announced that the company might not reach its targets for this year due to weaker results than expected in the trading and investment banking segments of its business.
Chipmaker Broadcom gained in after-hours trading, following the release of the company’s quarterly financial results which were better than expected and gave a view of further profitability gains in the future.
On Friday the nonfarm payroll (NFP) for November will be released, together with the unemployment rate that is expected to stay unchanged at 3.7% and data on average hourly earnings, average work week, wholesale trade, consumer credit and the University of Michigan consumer sentiment survey.
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