Article / 09 August 2016 at 7:00 GMT

Morning Markets: Finally, Opec prompts oil optimism




  • US: NFIB Small Business Optimism Index (1000 GMT)
  • Brazil: Retail Sales (1200 GMT) 
  • UK: NIESR GDP Estimate (1400 GMT)

Finally there's cause for optimism about oil, with Opec planning to meet late next month. The news that the cartel will hold unscheduled talks has revived hopes of a deal on crude output. However, an initial price advance on this encouraging news was dashed by a bout of profit-taking in Asian trading as investors cashed in the previous session's near-3% gain and worries about the ongoing global supply glut re-emerged.

Elsewhere, CPI and PPI data released from China has added support to the view that Asia's top economy is heading for sluggish growth at best. The overnight news out of Japan was poor too: orders for machine tools in Japan took a sharp dive in July, extending a dismal run in a series that is a useful litmus test of both the state of Japan’s manufacturing sector and global demand.

In FX, the US dollar is trading higher, especially against the yen amid renewed expectations that Japan's prime minister, Shinzo Abe, will let fly another arrow of monetary easing this coming autumn. One wonders just how many arrows his quiver holds (and when he will run out...).


Market signals

Asian session

  • Crude rallied hard on the news of an Opec meeting in September with WTI up 3%
  • UK sales rebounded with BRC showing a 1.1% year-on-year rise in July
  • Japan's Nikkei 225 was up 0.69% to  16,765.20 at 0457 GMT
  • China's CPI fell to new lows coming in at an annualised 1.8% in July
  • China's year-on-year PPI was minus 1.7% in June, better than the minus 2% expected
  • The Shanghai Composite was up 0.29% to 3,012.89 at 0330 GMT, adding to recent gains
  • Falls for the property sector weighed on Hong Kong's Hang Seng
  • The Hang Seng was down 0.1% to 22,471.78 at 0522 GMT
  • S&P raised the long-term credit rating for South Korea to AA from AA– 
  • Korea's Kospi Composite was up 0.59% to 2,043.16 at 0504 GMT
  • Australia's benchmark S&P/ASX 200 edged higher, adding to Monday's gains
  • The S&P/ASX 200 was up 0.2% to 5,548.60 at 0518 GMT, buoyed by the big banks
  • Australia's business confidence came in at 6 for July compared to just 4 in June
  • The Reserve Bank of New Zealand is expected to cut its cash rate on to 2% on Thursday
  • RBNZ governor Graeme Wheeler wants a weaker NZD to lift import prices
  • Wheeler also wants to push inflation into his targetted 1%-3% band

Forex ahead

  • The US dollar edged a little higher against the yen; it was worth ¥102.3760 at 0516 GMT
  • The Aussie dollar held onto recent gains; it was worth 0.7633 at 0517 GMT
  • The New Zealand dollar was worth 0.7128 at 0516 GMT
  • Five rate reductions since June 2015 have failed to push the NZD lower

From the Floor

Slowly, slowly. “It’s a bit of a waiting game for oil demand to catch up with supply so the upside remains limited”, says Ole Hansen.

Bonds flood. “There is huge supply in the US to come and that should bring some price pressure”, says Simon Fasdal.

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

Today's NIESR GDP estimate for the three months to July will provide a hard-data preview of post-Brexit conditions in the UK, says James Picerno.

Oil boost
Gold fell to the lowest in more than a week while oil companies got a boost after Opec said it would hold informal talks in September, writes Saxo Capital Market's Sydney team.

Good black stuff
Oil saw its third straight day of European-session gains on Monday with the  main drivers being "verbal intervention, the stronger-than-expected US jobs report on Friday, and the latest COT report that showed a strong buildup in short positions" says Saxo's head of commodity strategy Ole Hansen.


News that Opec will hold informal talks in Algeria next month has revived hopes that the cartel could agree on an output freeze and given crude prices a lift. Photo: iStock

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