Oil prices are volatile amid uncertain prospects for an OPEC deal
|Market movers today
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The highlight of the calendar today is the OPEC meeting in Vienna. Since late September, OPEC has worked on a deal to limit or cut output to support oil prices. There is no prescheduled time for an announcement but it is likely to come late in the afternoon (CET).
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In the US, PCE inflation figures for October are due out. We estimate the PCE core index increased 0.1% m/m implying an unchanged core inflation rate of 1.7% y/y, although it is a close call between 1.7% y/y and 1.8% y/y. We estimate the headline index increased 0.3% m/m, implying a significant jump in the headline inflation rate to 1.5% y/y from 1.2% y/y in October, due mainly to base effects from lower energy prices. Fed FOMC members Powell (voter, neutral) and Mester (voter, hawkish) are due to speak today. In addition, the Fed will release its Beige Book.
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In the euro area, the main release is the HICP inflation figure for November. We expect the rising tendency for headline inflation to continue throughout 2016 supported by an energy price-inflation pickup, while core inflation is very likely to continue below 1% throughout 2016. Hence, we still believe the ECB will not conclude that inflation is on a sustainable path.
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In the UK, the GfK consumer confidence and Lloyds Business Barometer indicators, both for November, are due out. We think both indicators will stay around current levels, as there is no news to indicate they may have been pulled in either direction.
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Furthermore, the Bank of England is due to publish its Financial Stability Report. As financial markets have calmed since the EU vote, we do not expect any major news in the report.
Selected market news
Oil prices are volatile amid uncertain prospects for an OPEC deal. Yesterday, oil prices dropped back on comments from Iran that it will not cut output followed by comments from Saudi Arabia that it will only cut output if Iran and Iraq join a deal. OPEC deal or not, we do not think it will matter much for the oil market over the medium and long term. A deal may send the price on Brent crude temporarily towards the high end of the range of USD44-53/bbl it has traded in over the past months. No deal will push it towards the low end.
Asian equity markets are mixed this morning. Both China and Japanese indices are down but broader Asian markets are up, despite renewed increases in US treasury yields and a rebound in the USD. Metals extended declines, falling for the second day in a row. This is probably due to a correction after a strong run in the wake of Trump's win in the US presidential election.
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