OPEC+ production speculation drives Oil lower

European equities started the week on the front foot, with sentiment lifted by Spain’s inflation data coming in softer than expected. Prices rose 2.9% in September, just below the 3.1% forecast. With ECB Makhlouf stating that the bank is likely "near the bottom" of its rate-cutting cycle, any resurgence in inflation pressures could close the door on further easing. The FTSE 100 is standing out as the best European performer in early trade, thanks in part to AstraZeneca’s decision to pursue a dual listing in London and New York. This is not just a corporate headline; it’s a symbolic win for the City after a string of high-profile departures in recent years. The move effectively leverages valuation arbitrage between London and Wall Street, with UK shareholders hoping for higher US-valuations that ultimately push up the FTSE 100 listing as a result.

Across the Atlantic, US markets are poised to build on last week’s momentum after Friday’s core PCE inflation measure held steady at 2.9% thanks to the 0.2% monthly print. That means the US has now seen the monthly figure come in at 0.2% for four of the past five-months, providing the Fed with the cover it needs to press ahead with rate cuts in the coming months. Gold’s surge to a record high of $3,816 per ounce is a clear signal that markets see policy easing ahead, with real yields expected to edge lower as the Fed eventually shifts course. That said, it’s not all smooth sailing: the looming risk of a government shutdown is an undercurrent that markets can’t ignore. However, a shutdown is not guaranteed, with Trump expected to advance negotiations during a bipartisan meeting of the top four US congressional leaders at the White House today.

Oil markets are heading lower in early trade, with Brent trading back below $69 a barrel as the Kurdistan region of Iraq resumes exports while OPEC+ looks poised to greenlight another output hike at Friday’s meeting. Reports suggest at least 137,000 barrels per day could be added in November, with the group clearly slowing their pace of expansion as we head into year-end. OPEC+ continue to remain focused on grabbing market share back from the US, with prices suffering as a result. Nonetheless, with Ukraine continuing to strike Russian oil facilities, and China building their strategic stocks in from Russian imports, the strength we saw in oil prices over the past week highlights the relatively balance market currently in play.