Traders will begin this week digesting the events from the G20 summit in Argentina, with the highly talked-up meeting between President Trump and President Xi appearing to have given the market hope that a full-scale trade war between China and the US can be avoided. Reports that the two leaders agreed that no new tariffs will be added from the start of 2019 amid ongoing negotiations will at least allay some fears for the moment, even though it still falls short of providing a permanent solution to this trade issue which has rattled markets for the last several months.
Aside from following any new developments on the trade front, markets will also be closely watching the US Non-Farm Payrolls data due on Friday. A dovish turn from the Federal Reserve Chairman late last week breathed new life into risk-assets, but with the US central bank still being data-dependant as it relates to the interest rate cycle, a strong employment-print this week may again see Monetary Policy expectations for 2019 adjusted higher.
Having slumped 22% in November, this week shapes as a critical one for the oil market as any hopes for an immediate price retracement higher rest on the OPEC summit this week. Officials from OPEC countries as well as allies such as Russia will convene in Vienna on the 6th December, and if a sizeable production cut is not announced as a way of addressing the current state of oversupply, then the price of crude will be in for more pain ahead.
But just how much will recent geopolitical events between the US and Saudi Arabia influence the decisions made at the summit? President Trump has been vocal about his desire for OPEC not to alter production levels, but one can only guess as to what impact this may or may not have when the key decisions are made the oil heavyweights sit down in Vienna to discuss output. The WTI price has barely been keeping above the psychological US$50 per barrel level, and a dip below here wouldn’t at all be surprising at some point in the lead up to the OPEC meeting on Thursday.
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Ongoing rate curve repricing and risk asset reaction perfectly illustrate how worryingly reliant investors have become on easy money policies