December begins with crude oil still in rally mode building on Wednesday’s explosive gains as traders respond favourably OPEC’s agreement to cut production. A meeting with non-OPEC producers is planned for next week to nail down that side as well. Progress toward managing supply after a two year war over market share that depressed prices is being seen as a positive for the oil market, regardless of the actual details. WTI is trading up 0.8% near the $50.00 level, just below the top of the trading range that has been in place for the last six months.
The big question for oil prices now, is what level would be enough to bring shut-in US shale production back on stream. This year, traders have been capping the price just above $50.00, but some agencies have suggested lately that the tipping point could be closer to $60.00.
Stock markets around the world are trading mixed through the release of manufacturing PMI reports, the first reading on how economies have performed this month. The FTSE is down 1.0% on a soft reading out of the UK while the Dax is down 0.8%. Reports out of China and Japan were a bit better than expected helping the Nikkei to gain 1.1% and the Hang Seng to rise 0.4%.
US index futures are trading down slightly as traders await US PMI figures later this morning and US nonfarm payrolls tomorrow. Traders will be looking for confirmation of yesterday’s positive ADP payrolls and Chicago PMI reports and more signs of a post-election surge.
In currency trading today, USD has slipped back slightly and is still showing signs of topping. Traders may look to upcoming data less for signs of whether the Fed will raise rates in December, which looks like a lock and more about how many rate hikes could follow in 2017. Incoming Treasury secretary had nice things to say about Janet Yellen further indicating she is likely to finish out her term, ending in January 2018.
GBP and EUR have capitalized on USD’s rally. CAD is also strengthening although so far gains appear light relative to the positive oil price and Canadian GDP tailwinds that have emerged this week. Canadian banks could be active again today with CIBC turning in strong earnings and a dividend increase while TD Bank met expectations.