US
Oil production in America continued its rise, hitting home market concerns that a surge in supplies would further put downward pressures on prices. Synchronized global movements have not helped either, as the rise in American oil production is matched by Saudi Arabia and Russia. The growth in supplies also vastly outstrips oil consumption, at 1.3m barrels/day. These downward pressures correspondingly have depressed prices, with WTI at $51.12 and Brent at $58.74. Oil prices have already declined by a third since the recent peak in October, intensifying worries of a 2016 bear re-run.
American markets are recovering however, as prospects of successful trade talks with China look better than before, with the S&P 500, Dow Jones and Nasdaq garnering momentum. Oil was the only contrarian trends, as supplies increased. Powell’s Fed comments that interest rates now were very near neutral further boosted markets, as the end of rate hikes is now in sight. Equity markets have thus moved in tandem this week; S&P by 4.8%, Dow by 5.1%, and Nasdaq by 5.6%.
The move by General Motors to shut down factories in the West to pivot into the much more profitable SUVs was rewarded as the stocks rallied after the news. Mr. Trump, however, wasn’t happy, and threatened to end the subsidies that they receive for its electric cars.
UK
In the United Kingdom, Brexit’s debate is still the hottest topic and the major market mover. After the approval of the agreement between the EU and the UK, made by the 27 European countries, on Monday the National Institute of Economic and Social Research (NIESR) published a report in which it states that the cost of Brexit may amount to more than £1,000 per British citizen. Moreover, on Wednesday the Bank of England declared that a “no-deal” Brexit would make UK’s GDP and Pound drop respectively by 8% and 25% after just one year.
Over the week, Sterling slightly decreased its value with respect to Euro as the GBP/EUR exchange rate moved from 1.1302 to 1.1263 (-0.35%). However, following the abovementioned BoE declaration, between Wednesday and Thursday the Pound was highly volatile and lost approximately 1.2% of its value.
The British stock market seemed not to be affected by the recent political developments, as shown by FTSE100’s movement. On Monday, the index opened at 6,952.86 and then floated slightly above 7,000 for the subsequent four days. During the last day of the week, the FTSE100 fell back below 7,000 and closed at 6,968.64 with an almost zero weekly change.
Next week, the Markit Manufacturing PMI Index will be released and on Tuesday Mark Carney, BoE’s Governor, will give its scheduled speech about future monetary policies.
Europe
This past week, the European stock market benefited from decreasing tensions between Rome and Bruxelles, as the Italian Government said to be ready to make adjustments to its fiscal law in order to comply with the European obligations. Consequently, almost every regional stock index showed a very close to zero weekly change. The Eurostoxx 50 was up by 0.7% and Italy’s FTSE MIB faced another volatile week with an overall slight decline of 0.4%. Also France, Germany and Spain followed the trend, as the CAC closed at 4,998.87 (+0.3%), the DAX moved from 11,315.90 to 11,257.24 (-0.5% weekly change) and the IBEX increased by 0.8% to its 9,063.70 weekly closing price.
Because of the abovementioned reasons, on Monday the BTP/BUND spread fell from its previous week closing (307.6 basis points) to 292.1 (-5.0%). Over the next four days, it floated continuatively around 290 points and then closed at 290.7.
Euro experienced a quite volatile week with respect to the Dollar. On Monday, the EUR/USD exchange rate opened at 1.134 and then, on Wednesday, it reached its weekly minimum at 1.127 (-0.6%). Over the next day, the exchange rate spiked up to 1.139 and closed the week at 1.131 with an insignificant 5-days change.
Next week, Eurostat will release data on Eurozone’s 3Q Gross Domestic Product change. Also, on Wednesday the ECB will host its non-monetary policy meeting and the Markit PMI Composite indexes will be divulged.
RoW
Carlos Ghosn, the chairman of the Nissan, Mitsubishi and Renault alliance was recently arrested in Japan over allegations that he underreported his salary at Nissan. Both Nissan and Mitsubishi have stripped his position, though Renault, the leader of the alliance, has not yet done so.
Sentiment in emerging markets like Turkey and Argentina have been improving of late ahead of the G20 summit focused on trade issues. Investors are now taking a wait and see approach, which contrasts favourable to the large sell-offs this summer.
Much is riding on the G20 summit in Argentina; data on China’s manufacturing sector points to a slowdown for the first time in 12 years, reducing the credibility of Xi’s Made in China 2025 plan. China’s CSI 300 is still down by 0.4% for November, affected by uncertain sentiment.
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