Manufacturing recession to continue, Oil near lows after OPEC+ “deal”

European equity markets are ending the week with decent gains while the US is more of a mixed bag, with investors now turning their attention to major events over the next couple of weeks.

The US jobs report next Friday, followed by CPI inflation data the following Tuesday and the final Federal Reserve interest rate decision of the year will likely determine how markets end the year and set us up for the first quarter of next.

Investors are increasingly buying into the idea of rate cuts starting in the second quarter of 2024, with the ECB and BoC making moves just before the Fed. But that will depend on the data continuing to deliver lower inflation and cooling elsewhere.

The manufacturing PMIs we've seen from both Europe and the US have been far from inspriring. The manufacturing recession is carrying into 2024 and showing little sign of improvement. In all cases, the surveys are still deep in contraction territory. The only good news for many like the US and UK is, manufacturing makes up a very small segment of the economy, around 10%.

Oil volatile near lows after OPEC+ "deal"

Oil prices remain quite volatile but more importantly, not too far from their recent lows after traders judged yesterday's announcement from OPEC+ with some skepticism. The lack of an official announcement, with details gradually appearing from individual member states indicated there's no firm commitment to the 2.2 million barrel per day cut. And Angola insisting straight after it won't comply further solidified that view.

Saudi Arabia will be hoping that others will, in the main comply, after it committed to extending its one million barrel cut until the end of March, while Russia increased its export reduction from 300,000 to 500,000. But it seems traders either aren't buying that members will be compliant or don't view it as being sufficient. Or, of course, that the lack of formal commitment hints at fractures within the alliance which could impact its ability to hit its targets, let alone cut further if necessary. If Brent breaks below its November lows, it will be perfectly clear what markets think of the deal.

A bright end to the year for gold?

Gold is trading near its recent highs after finally breaking and closing above $2,000 a week ago. It only closed marginally above here last Friday but that was enough to propel it higher earlier this week and it's not looked back since. The yellow metal has been buoyed recently by a less hawkish Fed and weaker labor market and inflation data.

There's plenty more to come from the US data and central bank over the next couple of weeks but today's figures won't have done it any harm either. Record highs are not far away now either so it could be a bright end to the year for gold.