Things are starting approach a climax, but market activity remains like a tightened coil

Traders enter the business end of the week

The news flow is starting to pick up in markets now. Price action remains relatively subdued, and that probably reveals the emphasis on US-China trade-talks. But several issues have captured market attention in the past 24 hours. The Pound was volatile yesterday, after the latest YouGov poll. Oil prices fell, following the release of US Crude Inventories data. The world has a new biggest company, with Saudi Aramco’s IPO delivering a massive valuation. The US Federal Reserve met, and kept interest rates on hold, as expected. And focus now shifts to the ECB meeting in the day ahead, at which its expected to keep policy unchanged.

News flow is dense, but market moves limited

Things are starting approach a climax, but market activity remains like a tightened coil. Important news is dropping in the market, however movements in market prices are isolated, and relatively limited. It probably betrays the significance of US-China trade-talks at-the-moment: traders wish not to make any major moves until its absolutely known that December 15’s tariffs hikes will be delayed. As a result, US and European stock indices have traded on thin volumes, albeit with a slightly positive tilt overnight. The ASX 200 will probably buck that lead today, however, with SPI Futures suggesting the index will shed much of yesterday’s gains, and drop 30-points this morning.

The GBP fell after the release of latest YouGov poll

The most meaningful news released in Asia trade arguably came out of the UK yesterday. The latest YouGov poll was published – the last before the General Election – and showed that UK PM Boris Johnson’s Conservative Government’s election lead has narrowed. A Tory win is still considered the base case. But the real concern for market participants is that it will not result in a majority government. That throws into doubt the odds of a clear mandate for PM Johnson’s Brexit deal, lowering marginally the chances of a “smooth Brexit” come January 2020. The Pound dropped yesterday as a result, before reclaiming ground throughout last night’s trade.

Oil prices drop on US crude inventory build

There was a degree of volatility in oil prices last night. Oil has seen a flurry of buying activity in recent weeks, as hopes build for a turnaround in global growth, and OPEC+ pledged to act to curb a looming global oil oversupply. Though the short-term uptrend remains together, Brent crude prices slipped a little less than 1%, after US Crude Inventory data revealed an 800k barrel increase in inventories, versus what was forecast to be a -2.8m drawdown. The data reignited the idea that perhaps the demand side for oil is a touch soft, and that ought to keep upside in prices contained.

Introducing the world’s new, biggest company

Some possible toppy-ness in oil markets didn’t deter investors in Saudi Aramco’s historic IPO yesterday. The world has a new largest publicly listed company, with Saudi Aramco realizing a valuation after its first day’s trade of $1.9 Trillion. It wasn’t quite the $2.0 Trillion figure that the Saudis were targeting. But it was higher than the estimated $1.7 Trillion figure leading into the IPO. The result is a huge political coup for the Saudi regime. One, it’s great PR for the controversial royal family. But on top of that, the money raised by the IPO will go a long way to modernizing Saudi Arabia’s energy dependent economy.

Fed keeps rates on hold, flags steady policy settings

The first big risk event was held this morning. The US Federal Reserve met, and as expected, kept rates on hold. Because no move was practically a certainty going into this Fed meeting, all eyes were on the central bank’s quarterly economic projections and interest rate “dot plots”. They key points here: growth will remain moderate in the US economy, jobs growth ought to be a little stronger than previously thought, and inflation will keep running at or below the Fed’s “symmetrical” target. That’ll mean, according to the dot plots, rates should remain on hold into 2020, and perhaps beyond.

Lagarde to seize the agenda at tonight’s ECB meeting

Trader’s attention will be handpassed from the Fed to the European Central Bank now. The ECB hands down its final interest rate decision for the year, and too isn’t expected to adjust its policy settings. The real interest in this ECB meeting is in what message new ECB President Christine Lagarde delivers to the market. Traders will be effectively looking for a vision and agenda. With the European economy languishing, and the ECB looking increasingly divided, market participants are wanting to know how President Lagarde plans on galvanizing both Eurozone growth, along with the ECB itself as an effective and credible institution.