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Week Ahead: OPEC Meeting; UK Bank Stress Tests

By ETX Capital (Neil Wilson)Market OverviewNov 24, 2017 13:11
uk.investing.com/analysis/week-ahead-opec-meeting-uk-bank-stress-tests-200198506
Week Ahead: OPEC Meeting; UK Bank Stress Tests
By ETX Capital (Neil Wilson)   |  Nov 24, 2017 13:11
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Oil is the asset in focus as OPEC discusses a potential extension of production curbs, while in equities all eyes are on British banks with the Bank of England’s stress tests due out.

OPEC

Oil grandees from the Organization of Petroleum Exporting Countries (OPEC) convene in Vienna for their semi-annual meeting on Thursday, November 30th. The key topic for discussion will be whether to extend the 1.8m barrel-a-day production curbs due to expire in March 2018.

Current market consensus is that members, along with Russia, will agree to prolong the output controls as they seek further rebalancing in the oil market.

Expectations are high. Crude prices jumped to two-year highs ahead of the meeting in anticipation and speculative net long positions are at record highs, according to CFTC data. With the market positioned this long, it may be tough for OPEC to deliver enough to see crude futures rally any more.

Another factor that could keep a lid on any gains for crude is the presence of US shale. The International Energy Agency has recently trimmed its demand guidance for next year, noting that while OPEC is limiting production, non-OPEC supplies are rising as prices recover.

Saudi Arabia, the largest producer, wants an extension to cuts. Oil ministers from Iran to the UAE have also voiced support.

Unlike previous attempts to curb production, the current effort is proving remarkably successful. Output by members dropped 0.46% in October, to 32.59 million barrels a day.

Bank stress tests

Attention on Tuesday is firmly on Lloyds (LON:LLOY), RBS (LON:RBS), Standard Chartered (LON:STAN), HSBC (LON:HSBA) and Barclays (LON:BARC) with the Bank of England due to publish the results of its 2017 stress tests.

Banks are better capitalised than before, but this year’s tests will be tougher with a bigger contraction in global GDP and higher capital hurdles in the model.

According to Goldman Sachs (NYSE:GS), the average CET1 ratio for UK banks is up 60 basis points from last year's stress test and is up 150 bps year-to-date.

US inflation

The Federal Reserve’s preferred measure of inflation, the core personal consumption expenditures (PCE) index, is due on Thursday.

Although the previous report showed headline inflation jumped in September, core PCE remained lacklustre. Core PCE rose 1.3% in the 12 months to September, after increasing 0.1% the last five months. Core PCE has undershot the Fed’s target for more than five years.

In spite of the benign inflation conditions, the Fed is still expected to raise interest rates in December. The question is how much more tightening is to come in 2018. With this the last PCE reading before that meeting, traders will be watching carefully for any signs that it could shift policymakers’ projections and the so-called dot plot, which will be updated in December.

Manufacturing PMIs

Friday kicks off December with the last round of manufacturing PMIs of 2017. So far this year the surveys have pointed to a global rally for manufacturers as growth picks up. Europe has been particularly strong, with manufacturing growth seen at its best level in more than six years.

UK growth has so far been a little less strong than the eurozone, but may see some improvements after the CBI reported that order books for manufacturers are at their strongest in 30 years.

Brexit

No official negotiation rounds, but there could be a significant amount of communication from London and Brussels ahead of a planned meeting between Theresa May, Donald Tusk and Jean-Claude Juncker on December 4th. The UK prime minister has the backing of her cabinet to improve the financial settlement and hopes are high are that it’s enough to unlock talks on future relations by the time of the EU Summit on December 14-15th.

Economic Calendar

(All times GMT)

Monday, 27 November

Tentative – ECB financial stability review

15:00 – US new home sales

Tuesday, 28 November

07:00 – UK bank stress tests, Bank of England financial stability report

09:00 – Eurozone M3 money supply

10:00 – UK inflation report hearings

13:30 – Canada raw materials price index

15:00 – US CB consumer confidence

16:15 – Bank of Canada governor Poloz to speak

20:00 – RBNZ financial stability report

Wednesday, 29 November

00:01 – UK BRC shop price index

All day – German preliminary CPI inflation releases

07:45 – French consumer spending, preliminary GDP

08:00 – Spanish flash CPI inflation

09:30 – UK net lending to individuals

13:30 – US preliminary GDP Q3 (second estimate)

15:00 – US pending home sales

15:30 – US weekly crude oil inventories

Thursday, 30 November

All day – OPEC meeting

00:00 – New Zealand ANZ business confidence

00:01 – GfK consumer confidence

00:30 – Australia private capital expenditure, building approvals

01:00 – China manufacturing and non-manufacturing PMIs

07:00 – German retail sales

07:45 – French preliminary CPI inflation

08:00 – Swiss KOF economic barometer

10:00 – Eurozone CPI inflation flash estimate

13:30 – Canada current account

13:30 – US weekly unemployment claims, core PCE price index, personal spending

14:45 – Chicago PMI

23:30 – Japan household spending, national core CPI inflation, Tokyo core CPI inflation

Friday, 1 December

00:30 – Japan final manufacturing PMI

01:45 – China Caixin manufacturing PMI

09:00 – Eurozone final manufacturing PMI

09:30 – UK manufacturing PMI

13:30 – Canada employment change, unemployment rate, GDP

15:00 – US ISM manufacturing PMI

Corporate Calendar

Tuesday, 28 November

Topps Tiles Plc (LON:TPT) – final results

Pets at Home Group PLC (LON:PETSP) – interim results

Shaftesbury Plc (LON:SHB) – final results

Wednesday, 29 November

Tiffany & Co (NYSE:TIF) – Q3/2018, EPS estimate 0.763

Britvic (LON:BVIC) – final results

Thursday, 30 November

Kroger Co (NYSE:KR) – Q3/2018, EPS estimate 0.397

Daily Mail & General Trust (BS:DMGTl) – final results

Marston’ Plc (LON:MARS) – final results

Greene King (LON:GNK) – interim results

Disclaimer: Any information, analysis, opinion, commentary or research-based material on this page is for information purposes only and is not, in any circumstances, intended to be an offer of, or solicitation for, a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any person acting on it does so entirely at their own risk and ETX Capital accepts no responsibility for any adverse trading decisions. You should seek independent advice if you do not understand the associated risks.

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Week Ahead: OPEC Meeting; UK Bank Stress Tests
 

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Week Ahead: OPEC Meeting; UK Bank Stress Tests

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