OPEC moment of Truth & Global Political and Economic insights – 30 Nov 2016

OPEC moment of Truth & Global Political and Economic insights – 30 Nov 2016

Asian markets trading very cautiously as the stock market moves slightly lower. Dollar remains in a consolidation phase and waits today’s macroeconomic news before choosing further direction.

Today we have plenty of major macroeconomic news. The moment of truth has reached for OPEC, optimism for an OPEC deal will not be enough for today we need to have an agreement for freeze or cut in production. Yesterday, Crude oil losses reached 4.5% after Iranian minister supported that Iran will not cut oil production. It Is extremely difficult and risky to trade before a clear OPEC decision as the breaking news and leaks about the possible cut or no cut in production can skyrocket or plunge oil prices within seconds and obviously the trader has not the time to evaluate the details or even react and manage its risk.

U.S equity market and greenback appeared very resilient yesterday despite the large losses of Crude oil. US economy continue to gain momentum with a significant improvement while the macroeconomic data in Europe appears to have moderate improvement. Germany’s economy depends exclusively from its ability to export, 50% of Germany’s economy depends from exports which is not a small amount to be ignored from the Germany government. If Italian crisis starts to gain momentum then Germany will be one of the first countries that will feel the pain as 1% drop on German exports which means a 0.6% lower GDP, employment and growth will drop significantly in Germany if exports fall.

The recent economic crisis in Europe was not economically motivated but politically. For the last quarter of century the major trend is globalization however the past year it seems that this trend has lost significant momentum because of Brexit and Trump but the major globalization trend has not reversed, trends that are building for decades do not reverse within few months.

The rise of nationalism and economic protectionism in Europe reveals that the old political system has failed to meet the expectations of the European citizens. What is going on at the moment in Italy has nothing to do with the recent Brexit vote. In recent months Italy has been facing a political crisis, Italy has a high number of non-performing loans as 18% of Italian loans cannot be repaid. This can potentially blow up the social normality and stability, despite the above issues we do not see the upcoming referendum as a big threat for Italy. Yesterday ECB announced that it is ready to buy more Italian government debt if Renzi loses the referendum vote and that was enough in order to send the Italian bond yields lower and the Italian stock market higher. The ‘’whatever it takes’’ policy continue from Mario Draghi in order support the Italian debt markets seems to have a positive effect.

Francois Fillon will probably lead center right party against Mari Le Pen for the French presidential elections. There is great optimism that Fillon a supporter of a strong economic liberalism will beat Le Pen next summer however the French Thatcher (as called by his fans and media) has much more probabilities to become the next president if promises a ‘’ Frexit ‘’ referendum if he is elected.

Daily Key points:
• Greece Q3 Growth Revised Up, Strongest Since 2008
• US Consumer Confidence highest since July 2007
• German Retail Sales Rise Most Since Mid 2011
• Donald Trump to pick ex-banker Steven Mnuchin for Treasury nominee
• Argentina cuts rates. Global central banks’ policy easing steps since start of last year to 216

Daily Economic calendar:
Country Event Importance Previous Expectations Follow Times
Germany German Retail Sales m/m Medium -1.4 1.0 Euro 10:00
UK Bank Stress Test Results High N/A N/A All indices 10:00
UK BOE Financial Stability Report Medium N/A N/A GBP 10:00
France French Prelim CPI m/m Medium 0.0 -0.1 Euro 10:45
Germany German Unemployment Change Medium -13K -6K Euro 11:55
OIL OPEC Meetings High N/A N/A All Indices All Day
Europe CPI Flash Estímate y/y High 0.5 0.6 Euro 13:00
Europe Core CPI Flash Estímate y/y Medium 0.8 0.8 Euro 13:00
Italy Italian Prelim CPI m/m Medium -0.1 -0.2 Euro 13:00
Europe ECB President Draghi Speaks Medium N/A N/A All Índices 15:30
USA ADP Non-Farm Employment Change Medium 147K 161K USD 16:15
Canada GDP m/m Medium 0.2 0.1 CAD 16:30
USA Personal Spending m/m Medium 0.5 0.5 USD 16:30
USA Personal Income m/m High 0.3 0.4 USD 16:30
USA Chicago PMI Medium 50.6 52 USD 17:45
USA Pending Home Sales m/m Medium 1.5 0.3 USD 18:00
OIL Crude Oil Inventories Medium -1.3M N/A OIL 18:30
Europe German Buba President Weidmann Speaks Medium N/A N/A All Indices 19:00
USA FOMC Member Powell Speaks Medium N/A N/A USD 19:00
USA Beige Book Medium N/A N/A All Indices 22:00
China Manufacturing PMI High 51.2 51 All Indices 04:00
China Non-Manufacturing PMI High 54 51 N/A 04:00

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