Financial market research and analysis

Asian markets kicked the week off on the back foot, with futures markets across the globe following suit. A ramping up in tit for tat trade measures are sending shivers down the market, whilst lower energy prices are expected to pull oil majors lower.

After a 3.4% rally in oil helped the FTSE finish 1.2% higher on Friday, the 2% decline in the price of oil as the markets opened on Sunday is expected to drag on the share index, as trader’s price in the oil production increase agreed by the OPEC plus group in Vienna on Friday. With traders anticipating that the oil cartel would agree to boost production by less than 1 million barrels per day, if they were able to agree on anything at all, the price of oil rallied. However, as details of 1.8 million barrels per day increase were confirmed the price of oil has since dived.

Going into the meeting expectations were running high that there would be some agreement to raise oil production, with figures of 600,000 – 800,000 barrels per day extra being tossed around. The reality is that 1.8 million barrels per day is significantly more than what the market was expecting, which explains the steep sell-off in oil as trading begins at the start of the new week. Expectations are that this level of increase will now push oil production back into surplus territory after being approximately -0.2 million barrels per day in deficit.

Brent and WTI were both trading lower, although Brent by noticeably more at -1.3% whilst WTI shed 0.6% in the Asian session.

May Under Pressure to Accelerate No Deal Brexit Plans

With the EU Summit starting on Thursday, Brexit will once again be in focus. Last week pound traders celebrated Theresa May facing down Tory rebels to prevent MP’s from having a meaningful vote should there be a no deal Brexit. Over the weekend, hard-line Brexiteers ramped up the pressure on Theresa May for a no deal plan. Progress on a Brexit deal has been alarmingly slow and with the clock ticking Brexiteers view this as the only way to ensure a good break from the Brussels. Any signs of a harder Brexit are expected to weigh on demand for the pound, particularly given the lack of high impacting economic data until later in the week, potentially bringing $1.31 back into target.

Another Week, Another Measure in the US-Sino trade war

The markets shrugged off Trump’s retaliation on Friday, threatening 20% tariffs on EU cars. In the latest escalations of the trade war, Trump has decided to take aim at Chinese investments. A draft series of restriction on inbound Chinese investments are due to be published later this week, in a move which could have great long-term consequences on the US – Sino economic relationship. Once again details remain very sketchy, with the scope of such a measure still under discussion. But, what’s clear it is now very difficult to get away from the fact that neither side has any intention of backing down in this game of economic “chicken”.

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