Oil prices are trading relatively stable

Market movers today

Today, German retail sales figures for October are due to be released. We have seen two consecutive monthly declines in August and September and we expect a bounce back in October. However, the overall picture indicates weakening private consumption in Europe in 2017. The real wage is weakening as nominal wage growth remains constant while inflation is rising. Thus, despite a bounce back in October, we expect retail sales figures to remain somewhat weaker looking ahead.
Monday also brings M3 money supply growth and loan growth for October. We estimate M3 money growth will show a continuation in the 5% y/y growth figure for October. Loan growth, however, may be heading towards a slowdown. Despite lying at 1.8% y/y since June, the decline in European bank equities may indicate a slowdown in loan growth. We therefore see a risk that loan growth could be lower in the remainder of 2016.

Selected market news

Generally, market sentiment has been strong overnight with most Asian equity indices up. Most Asian currencies are also strengthening against the USD as market is taking a cautious stance after the recent rally and ahead of key US economic releases this week on US GDP, personal spending and nonfarm payroll.

Oil prices are trading relatively stable ahead of Wednesday's OPEC meeting, a deal to limit oil output to support oil prices will be discussed. We doubt that OPEC will be able to agree on anything that will have a substantial impact on oil prices. Based on recent headlines, it seems probable that it will come to some sort of agreement on a small output cut. It may spur a temporary small rise in oil prices, which we believe will fade as the market realises that compliance within the cartel is not strong enough for a deal to survive.

In France, Francois Fillon yesterday unexpectedly won the Republican presidential primaries over Alain Juppé with a large margin (67% of the votes). Fillon has based his campaign on a right-wing, market-friendly view, favouring the deregulation of the labour market and sizing down of the public sector. Attention now turns to which candidate the Socialist party will put forward to challenge Marine Le Pen from the National Front.

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