The Morning Hark - 1 Dec 2023
Today’s focus... OPEC+ decision muddies the waters. US PCE softens but underwhelms. Powell will he be pre or post Waller?
If you haven’t upgraded yet, subscribe now to continue reading.
The Morning Hark will gradually move behind a paywall over the next week. Starting today, the free content included will be limited, and from December 11th, we will only send the newsletter out to paid subscribers. Keep reading for just $6/month (less than $0.30/day).
Alternatively, subscribe to a HarksterPRO subscription for just $24/month to keep reading all our newsletters.
Overnight Highlights
Prices are as at 7.00 GMT/2.00 EST, with changes reflecting movement from midnight GMT
Oil - Oil holding steady and at least for now its stopped the bleeding. Brent and Crude February futures currently at 80.70 and 76 respectively. Oil set itself up for a fall with an over optimism surrounding the OPEC+ decision. The outcome seriously underwhelmed the market with the rather opaque nature of the decision and announcement alongside the obvious descent in the cartel’s ranks. Oil is now facing a sixth consecutive week of losses. In addition the EIA reported that US production levels in September rose to a new monthly record.
There was a lot of chatter pre OPEC+ decision and announcement. Conjecture, from two delegates, suggested that a proposal had been put forward that involved the Saudis extending their 1m bpd voluntary cut into the new year with others members making additional cuts.
This was then added to, again by two delegates, that the 2024 cuts could possibly take 1-2m bpd off the market in q1.
Eventually the agreement slowly dribbled out with delegates agreeing on a structure of voluntary cuts to go alongside the existing cuts from Saudi Arabia and Russia.
The end result was 8 countries involved with additional voluntary cuts of oil output of around 0.9m bpd taking the total cuts to 2.2m bpd according to OPEC. This should in theory move the oil market back into deficit for next year. More below.
I did say yesterday that the picture would become less muddied after the announcement but the nature of it and the fact that Angola has refused to accept the quota leaves the picture even more confused. In addition given the measures were “voluntary”, alongside Angola’s descent, suggests that getting an unanimous agreement in the future, for OPEC+, may prove to be tricky.
OPEC - Additional voluntary cuts
EQ - Asian equity markets starting the new month off a touch with the Hang Seng and Nikkei futures at 16,990 and 33,420 respectively.
The US indices consolidating in Asia with the S&P currently at 4575 whilst the Nasdaq is at 15,955. The pair had their best month since July 2022 with 9% and near 11% gains on the month respectively.
Gold - Gold holding in its new range above 2000 with it currently at 2041. Again little changed; 2050 the short term trading pivot with 2085 the upside target and support at 2020. All eyes on Powell.
FI - Global yields back into sell off mode in Asia after yesterday’s upside rebound. Currently the US2y and US10y sitting at 4.68% and 4.33% respectively. The upside move in rates perhaps due to some position trimming post PCE which, although softer, perhaps disappointed market participants it didn’t soften more in line with the earlier European prints. The spectre of Powell probably helped the trimming momentum as well as Williams nod to financial conditions.
European yields firmed a touch in line with their US counterparts with the German 10y closing at 2.45% and the Italian 10y yield similarly at 4.22%.
UK gilt yields similar pattern with the 10y closing at 4.17%.
FX -Quiet Asian session with the USD holding onto yesterday’s gains on the back of higher US yields. The USD Index little changed at 103.35. The JPY, EUR and GBP all equally quiet with them currently sitting at 148.20, 1.0910 and 1.2640 respectively.
FX option expiries wise today in the EUR we see €2bn rolling off at 1.10 and €1.6bn at 1.09. Whilst in USDCAD, in light of their labour report, we have $1bn each at 1.3620 and 1.36.
Others - Bitcoin and Ethereum bid in Asia with the pair knocking on their year’s highs. The pair currently at 38,180 and 2090 respectively.