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Saudi Arabia to curb Oil production - EMEA Brief 12 Nov

Guest IG-Andi


  • Crude prices gained, as Saudi Arabia leads OPEC and its allies into cutting Oil supply from December. The Saudis mentioned seasonal factors among concerns for weaker demand, as they laid ground for a wider production curb in 2019.
  • Gold holds steady near a one month low as it keeps losing lustre as a safe haven to the benefit of USD. Spot gold was little changed at $1,209.57 per ounce at 01.21 GMT. Will the commodity benefit from a more divided White House?
  • Yuan proxies such as AUD and NZD are experiencing downward pressure as traders hedge against interest rates hikes from PBOC.  Yuan is gaining ground as a safe haven, amidst gloomy global outlook.
  • The Euro could benefit from a rebound in German growth, as the country accounts for almost one third of the euro-zone economy. Expectations are growing as, according to the VDA German carmaker association, 440,000 new cars were produced in October, compared to 310,00 in August.
  • The downward pressure on US Treasuries could weaken, after 10-year yields started coming down from almost a 7-year high, as oil moved higher overnight. 
  • Asian equities edged higher this morning overcoming the drag on Friday of Large-cap US stocks (the Nasdaq lost more than 1.5%).  Australian shares added 0.13 percent, while Japan's Nikkei stock index gained 0.11 percent.

Asian overnight: A somewhat uninspiring session saw Chinese markets provide the only substantial move, with the Shenzhen composite rising over 1%. The FTSE China A50 rebounded amidst positive expectations for industrial data to be released on Wednesday and Alibaba’s record sales volume yesterday. Meanwhile, Japanese, Hong Kong, and Australian markets largely posted very moderate gains to kick off the new week. On the data front, Japanese PPI eased from 3% to 2.9%.

UK, US and Europe: May braces for a tough week to keep her Brexit plan alive. Opposition from both sides mounts and one area of contention is a clause that would allow the  UK to exit the Customs Union only via a bilateral agreement. According to International Trade Secretary Liam Fox, a second referendum is not even in question. The Cabinet was expected to meet today, but yesterday there was no sign of progress. Meanwhile, major US banks are planning to shift about €250 billion of balance-sheet assets to Frankfurt because of Brexit.

Italian treasuries have the highest yield among investment-grade bonds in the euro area and piqued the interest of M&G Investments and BlueBay AM LLP. Yield on Italian sovereign dept keeps plummeting before tomorrow, which is the deadline to submit a revised budget plan to the EU, as the markets downplay the risk of Italian populist politics. However, the Italian coalition government has already dismissed Brussels' ultimatum and warns that the plan remains unchanged. 

Looking ahead, Veterans' Day in the US means we will see lower volumes throughout the day. Given that there are no major events to note throughout the European session, we are likely to see a continuation of the running themes of the weekend, with crude and sterling grabbing market attention. 

Economic calendar - key events and forecast (times in GMT)

Econ Cal 12.PNG

Source: Daily FX Economic Calendar

6:00 - JPY Machine Tool Orders. Previous at 2.9% vs actual at -1.1%. Higher tracks trends in machine tool orders placed by major manufacturers means higher capital spending.

Corporate News, Upgrades and Downgrades

  •  AstraZeneca said that its diabetes drug had ‘significantly’ reduced the risk of hospitalisation for heart failure. 
  • Playtech has reaffirmed its full-year guidance, although trading in Asia had hit performance. Overall growth outside Asia remained resilient. 
  • Diageo said that it would launch an additional share buyback programme after an agreement to sell nineteen brands to Sazerac for a total of $550 million. 

Burberry upgraded to neutral at Intermonte
Logista upgraded to neutral at Credit Suisse
DSV upgraded to buy at Berenberg
Danske Bank upgraded to buy at Kepler Cheuvreux

Hikma downgraded to hold at Peel Hunt
Panalpina downgraded to hold at Berenberg
Richemont downgraded to outperform at Raymond James
UniCredit downgraded to neutral at Intermonte

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