OPEC+ looking to stick to current output cuts

Jens Nærvig Pedersen Danske Bank A/S

Market movers today

Today focus will be on the Bank of England (BoE) rate decision at 13:00. We expect the BoE to remain on hold amid the ongoing political chaos and an approaching snap election. However, we will look for further signs that the BoE is moving closer to easing monetary policy, as the economy is slowing and some MPC members have sounded more dovish recently.

In the euro area, we get the European Commission's autumn economic forecast. The report includes the latest fiscal projections, which will be scrutinized by the market not only with respect to Italy, but also for signs that a European-wide shift in fiscal easing is underway, as the ECB has been calling for recently. The autumn economic forecasts will also be discussed at today's meeting of EU finance ministers, who will also debate Isabel Schnabel's bid to take up the vacant 'German' seat on the ECB board.

In Germany, we get the September industrial production figures. Yesterday's factory orders beat expectations and increased by 1.3% m/m with rays of light also in the battered car sector. Still, we think today's figures will confirm that the German industrial sector remained in recession for the fifth quarter in a row.

In Norway, we expect industrial production figures for September to show a moderate increase (see next page).

Selected market news

US and China are still trying to work out the logistics of the signing of the so-called phase one deal trade deal. It concerns both the time and the place of a ceremony to conclude the agreement. The latest rumours suggest that it may not take place until December and that the parties are looking at possible sites in Asia or Europe.

The seemingly innocent news was enough to put the brakes on the past couple of days' positive sentiment in markets. Bond yields dropped back, commodities turned lower and JPY higher.

The oil market was negatively affected not only by the trade news yesterday but also by news that OPEC+ is not going to consider increasing its current output cuts when it meets next month. Rather, it wants to increase compliance to current output cuts. The news added to the decline in oil prices. In addition, the weekly US oil inventory report showed an increase of 8mb last week. The price on Brent crude dropped below USD62/bbl.

Both New York Fed's John Williams and Chicago Fed's Charles Evans yesterday hinted that they think the current monetary policy stance following three rate cuts is appropriate for the current outlook for the economy. However, Williams also stressed concerns about low inflation expectations keeping down actual inflation.

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Jens Nærvig Pedersen

Danske Bank A/S

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