It’s been quite a slow start to trading on Wednesday, with equity markets in Europe trading relatively mixed and US futures currently pointing to a flat open.
Commodities have been a good source of direction for the markets in recent days but it appears we’re running out of steam here as well which may explain the lack of direction so far today. We’re seeing some gains in oil early in the session but even this is quite small when you compare them to what we’ve seen in recent weeks. It would appear that while traders are pricing in an increased chance of an OPEC deal to cut production, they’re not fully buying into it as they have in the past which is not surprising given the obstacles they need to overcome. With EIA crude inventory data to come later on today, it will be interesting to see if oil can hold onto these gains given that API reported a small decrease in inventories on Tuesday.
The dollar has been an important driver for markets recently but with a December rate hike almost entirely priced in and the FOMC minutes being released later in the session, it would appear bulls are taking a breather. All of this consolidation probably isn’t being helped by the fact that it’s Thanksgiving week, US markets are closed tomorrow and we’re therefore seeing the usual volume dip that comes at this time of year.
It’s also worth considering that many of the catalysts that were likely to spark markets to life today are still yet to come. We’ve had some eurozone PMIs this morning which showed business activity growing at its fastest rate this year, although this has offered little upside in the euro. The UK Autumn statement could trigger some volatility in the pound and the FTSE, although the new Chancellor’s is expected to be relatively conservative with the loosening of the purse strings as the economy has yet to suffer the shock that so many have warned will come. Some small comforts are expected to be announced today but with government finances already stretched, I think Philip Hammond will hold off on some of the bolder measures until it becomes clear that the storm clouds are gathering.
We’ll also get a raft of data around the US open including jobless claims, core durable goods orders, UoM consumer sentiment, manufacturing PMI and new home sales. This will be followed later by the minutes from this month’s FOMC meeting, which may be less significant than they’ve been in the past for a few reasons. The first is that a hike next month is now all but priced in. The second is that we’ve heard from a number of Fed officials since the meeting and many have strongly hinted at a hike next month. And the third is that the meeting took place less than a week before the election and is unlikely to offer any insight into what we can expect next year in the event of a Trump victory and all the policies that entails.
For a look at all of today’s economic events, check out our economic calendar.
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