European markets have a positive start

European markets have started the week on a stronger note after oil prices bounced back from one of the sharpest drops in years on Friday.

G20 rather than OPEC could hold key to oil prices

Brent crude is trading up almost 2% and WTI is up 1.6% this morning, having plunged 6.1% and 7.7%, respectively, on Friday when some traders whipped up hysteria ahead of the next OPEC meeting in Vienna. The oil cartel will gather on December 6 to discuss plans for production levels but the real decision on oil output is likely to take place days before that when heads of G20 countries meet in Buenos Aires. US President Trump has been calling for lower oil prices and has explicitly asked Saudi Arabia to keep up production levels. The world’s largest producer Russia is also unlikely to want to cut output levels because the income from oil production is closely linked to its budget deficit or surplus. In that kind of environment a deep output cut seems unlikely and instead the current levels may become the new normal.

Italy stocks, bonds recover

Italy’s FTSE MIB index is leading the way higher for European gauges after the country’s PM Matteo Salvini signalled over the weekend that the country may lower its contentious borrowing target. Late last week the EU again rejected Italy’s budget proposal for next year over the country’s plans to keep its deficit at 2.4%. This morning Italy’s bond markets are in recovery mode on hopes that the two sides will be able to bridge the chasm.

Pound firms on Brexit nod

The pound is stronger against the dollar this morning as EU leaders agreed to Britain’s draft Brexit proposal this weekend despite grumbling from Spain over Gibraltar. The next Brexit hurdle is the final approval from Parliament which at this stage is far from a sure bet. The PM has turned to the country over the weekend asking for support for her Brexit deal, hoping that popular support would sway parliamentarians to accept a deal which most of them resent. The currency market is bound to face more volatility over the coming days as the final pro and counter moves are made on the political stage.