European markets have started the new week firmly on the back foot with oil prices and banks under pressure in early trade.
The sharp slide in the oil price on Friday has continued in early trade this morning with an admission by the Saudi oil minister that output cuts might not be needed and that the oil market could well rebalance itself in 2017.
This is a marked change of tone ahead of this week’s meeting in Vienna as some officials head off to Russia today to try and cobble together some form of agreement to sell to the markets later this week. In September oil ministers agreed that they should cut production to between 32.5m and 33m barrels a day, with the only details to be ironed out as to how the cuts would be divvyed up.
This now looks to be a forlorn hope with Iraq and Iran both unwilling to cut too deep, while Saudi Arabia would be unlikely to act alone. For a cut to work Russia who aren’t members of OPEC, would also need to cut sharply as well and they seem only willing to freeze production at current levels, which suggests that any meaningful deal may well not happen.
As oil prices have resumed their decline Royal Dutch Shell (LON:RDSa) and BP (LON:BP) shares have slid back, while banks have also come under pressure across Europe with Italian banks leading the way, ahead of the upcoming Italian referendum, due this coming weekend. In the UK we also have the release of new Bank of England stress test results which are due out later this week, with Royal Bank of Scotland (LON:RBS) looking the most vulnerable.
On the plus side Aberdeen Asset Management shares have ticked higher despite reporting a net outflow of client funds in the most recent quarter as well as a 28% drop in profits. This net outflow appears to have weighed on the sector with sector peers Hargreaves Lansdown (LON:HRGV) and Schroders (LON:SDR) seeing some early weakness.
A rebound in gold and silver prices is also helping certain sections of the mining sector with Randgold Resources (LON:RRS) and Fresnillo (LON:FRES) in positive territory.
The kick-off of the pre-Christmas shopping period continues to day with Cyber Monday getting under way as retailers gear up for the busiest online shopping day of the year.
The recent rise in the US dollar appears to have run its course for now with some heavy falls after hitting 13 year highs last week. The biggest decline has come against the Japanese yen as traders start to book some profits after a strong run of gains since the US election result.
US markets look set to pick up on this negative tone when they return from their Thanksgiving shortened but record breaking week later today, with a slightly weaker open in what is likely to be a very busy week data wise, as investors look to a host of economic data, including the latest payrolls report on Friday.
The Dow Jones is expected to open 57 points lower at 19,095
The S&P500 is expected to open 8.35 points lower at 2,205
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