Market News & Analysis

Things to watch on Thursday 1st December

  • Oil is pulling back from yesterday’s Opec-inspired mega rally. This is to be expected after it climbed 15%. This looks more like a short-term period of profit taking rather than a reversal in the previous trend. Key support for Brent is: $51.50 – a resting zone on Weds, and then the key $50 level. A drop back to $50 would suggest fatigue from the oil bulls.
  • However, we would argue that the 1.2mn barrel cut from Opec members and 600k cut from non-Opec members was roughly in line with expectations, so the market may have to look for other drivers to see further upward momentum in oil.
  • Luckily for the oil price, the trend of global growth seems to be higher. This is good news for commodities and stocks in the medium term.
  • Energy stocks are still benefitting from the Opec cut today, there could be more upside for the likes of Shell and BP as this is one of only a few pieces of good news for these companies this year. If we continue to see energy shares move higher then 495p, the 2016 high, could be in sight for BP.
  • After a solid set of Asian PMI’s the market now shifts its attention to UK manufacturing PMI at 0930. This is expected to come in at a decent 54.4. French PMI has also beaten expectations, which has helped EURUSD pop back above 1.06. We continue to think that any upside in EURUSD could be limited ahead of the Italian referendum.
  • With Opec out of the way, the market’s attention is now likely to turn to the Nov US NFP data due on Friday, and the Italian referendum on Sunday.
  • The market will be looking for a strong NFP on Friday; expectations are for an 180k reading, although some may expect a higher number after 216k in the ADP yesterday.
  • A strong number is likely to sustain the upward march in Treasury yields, which could sustain the dollar rally, which has been trading sideways of late.
  • In FX: the pound was the best performer in the G10 last month, and continues to top the G10 leader board today. We would expect to see some sideways action in GBP at some stage this month.
  • USDJPY surged above 114.00 yesterday, which was the highest level since March, the weakness in the yen is a key theme that is likely to last through to year end if we continue to see a favourable environment for risk.

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