E Markets: Grinding

There is a skate park feel to trading as the painful retreat of equities and oil feels like a trick gone bad. The oil fail today has many reasons – the FOMC hawkish tone, the Saudi OPEC doubts, China confidence crumbling (Auto sales of 12% in Oct), US politics, Italian banks, Brexit deal doubts. What is clear for markets is you don’t get off the half-pipe accident without some blood, sweat and tears. Overnight economic stories didn’t help – UK industrial production weaker, UK 3Q GDP in line but September weaker, UK trade still a drag, China PPI/CPI in line but not helpful for growth, Australian SOMP upbeat on growth but sees more risks on trade. Beyond the economic headlines – which are mixed at best – you have these tidbits to consider:

When you mix this all together the uptrend for the USD holds as it’s the October safe-haven and perhaps still the same for November. What seems most hurt in the week isn’t the EUR or CNY but oil and that maybe the key for watching risk in equities into the weekend.

Question for the Day: Is Oil the next key for markets? The OPEC weekend meeting maybe more important for markets than the further analysis of US mid-terms and US/China trade hopes. Oil went into a bear market yesterday and today, WTI trades below $60. The risk of less price pressures from inflation has helped some nations – India being one obvious winner – but for the US this is mixed.  For Saudi it’s a problem.  For OPEC its worse – Saudi is 1/3 of the total output and its future is more linked to the US and Aramco IPO than others. The WSJ reports on a Saudi study about the end of OPEC. The OPEC study aims to “assess the short/medium-term consequences of a dissolution of OPEC,” according to an overview reviewed by The Wall Street Journal. It is intended to determine how the global oil market, and Saudi finances, would look “if coordination between oil producing countries disappear,” according to the overview. The overview describes two scenarios to investigate, if OPEC isn’t in the picture: 1. All big oil producers, including Saudi Arabia, act competitively—fighting each other for market share; 2. Saudi Arabia, instead, attempts to leverage its massive oil output alone to help balance global supply and demand in an attempt to keep oil prices steady—similar to the role that members say OPEC plays today.

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Thorgood 4 weeks ago Member's comment

cheap oil=tax break...doing the Fed's dirty work..no rate hike Dec. if oil stays low

William K. 1 month ago Member's comment

Don't go crying because oil prices are not climbing higher and higher, because high oil prices hurt everybody else. So get the profit someplace that does not damage the economy and hurt everybody else.