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#SaxoStrats
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The week ahead in macro
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10 September 2018 at 7:37 GMT
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Video / 29 November 2017 at 8:23 GMT

From the Floor: Shale looms large ahead of Opec meeting — #SaxoStrats

#SaxoStrats
   • UK, EU agree to 'divorce bill' worth up to €50 billion: BBC
   • US shale concerns loom over Thursday Opec summit in Vienna
   • 'We think that the cyclical peak in equities is likely near': Garnry
   • UK banks pass stress test, but Carney warns of recession risks
   • Markets broadly ignore North Korean missile launch

SaxoStrats
By Michael McKenna

"The next 48 hours will determine crude oil's direction for the remainder of 2017," says Saxo bank head of commodity strategy Ole Hansen. This timeframe, of course, includes Thursday's Opec/non-Opec summit in Vienna where the latest reports indicate that Russia may not be willing to extend the price-supportive production cut deal currently in place.

"Moscow is looking for a clear plan on the deal's phase-out process," says Hansen, adding that possible exemptions for Libya, Nigeria, and Iran may also be causing friction.

Brent crude currently trades at $63.33/barrel while WTI sits at $57.75/b.

In forex, the GBP is rallying sharply on reports that the UK and the European Union have agreed on the long-outstanding Brexit "divorce bill". According to the BBC, the accord could see the UK paying as much as €50 billion to the Union, but earlier reports of a €55bn settlement have been downplayed by British officials.

The news saw GBPUSD spike north of the 1.34 handle with TradingFloor.com contributor Alan Collins calling for further strength in sterling. 

GBPUSD:
GBPUSD

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Source: Saxo Bank 

The German CPI release at 1300 GMT is today's main data event, says Saxo bank head of equities strategy Peter Garnry, as inflation remains the largest open question for markets as we head into 2018. According to Garnry, record survey highs and developing consolidation trends mean that the cyclical high for stocks is likely on the horizon.

"US tax reform, if passed, could see share markets extend for another one or two months before we see a healthy correction," concludes Saxo's equities head.

Another key data point on the inflation front is Thursday's US PCE release, which Saxo head of FX strategy John J Hardy says presents "a considerable two-way risk" if the reading surprises markets – and dollar bears in particular.

Finally, Saxo Bank Global Sales Trading manager Althea Spinozzi reports that the UK's babnks passed their latest stress test Tuesday with regulators concluding that losses could be absorbed by banks' extant capital buffer. Despite the result, Bank of England governor Mark Carney stated that the combination of Brexit and a 2018 recession could pose risks above and beyond those postulated by the stress tests.

For more on commodities, forex, equities, and markets' muted reaction to the latest North Korean missile launch, watch today's Morning Call in its entirety above.

London
London is prepared to offer up to €50bn as a "divorce settlement" 
to the EU, according to reports. Photo: Shutterstock

Michael McKenna is senior editor at Saxo Bank

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