Trading Journal

Oil prices rose on the back of rising expectations that the OPEC meeting scheduled for next week will allow the cartel to prolong cuts to oil production currently in place.

In the commodities sector, the price of oil rose in international markets (in the US it already surpassed the 58 USD a barrel barrier for the first time since July 2015), driven by the growing expectation of a decision to cut output during the OPEC meeting scheduled for next week. In addition, the news about the interruption of production in a pipeline in Canada, which implies an 85% cut in the supply of this raw material to the US, also contributed to its upward trend.

Today was marked by a weak activity in the European markets, explained by the closing of the American stock exchange, due to the celebration of the “Thanksgiving” in the country. Thus, the variations in the main stock indexes were quite contained, and the utilities sector was negatively highlighted, due to the announcement of some business results.

In the pre-opening, the European markets traded in slight rise. The weak activity and low trading volume, explained by the holiday season in the US (associated with Thanksgiving), should continue to mark today's session on European markets. The agenda of corporate results and the agenda of macroeconomic indicators haven't relevant events for today, so the focus should be on the continuing political uncertainty in Germany and on business news that may arise throughout the day.

On Monday, Britain’s Micro Focus suffered a heavy loss after Deutsche Bank cut its recommendation to buy to keep.

Oil companies have been among the best performers in the hope that OPEC members will be able to extend the cut-off on crude oil production.

Asian markets ended with some gains, with the potential positive effects of a hypothetical US tax reform approval overlapping with yet another North Korean ballistic test. Although the US tax reform has as its main objective to boost the domestic economy, the potential increase in household income should also benefit products imported from Asia. Yesterday some Japanese newspapers had anticipated a ballistic test by North Korea which, according to regime propaganda, could hit the United States.

Asian markets ended lower, penalized by weakness in the technology sector, which was plunged by the steep fall in Nasdaq. In Tokyo, the weakness of technological Stocks was more than offset by the appreciation of the banking sector. It also notes the rise in interest rates in South Korea (the first in 6 years) and the release of the PMI index in China. The PMI index for manufacturing industry in November reached 51.8 against the estimated 51.4. At the services level, PMI stood at 54.8 compared to 54.3 in October.

On the daily chart of gold we can see that the precious metal has been boxed between the 200 day EMA at the 1270 level and the 1300 level. If we see a rise of volatility close to a support or resistance zone, the commodity may be getting ready to take off.

The US Senate passed a string of fiscal measures aimed at increasing American incomes by a very small majority (51-49). Postponing the description of the main measures of this document to another time, the issues that its approval places are described. The first is the time it will take to reconcile with the proposal passed in the House of Representatives. The second is to try to anticipate (as much as possible) what the real effects will be on the real economy. The third concerns the impact it will have on the public deficit. If it is very significant, it may imply a generalized rise in yields, which will cause a profound change in the global stock market situation. The fourth, which depends a little on the others, is to know how much of the positive effects of this reform have been anticipated by the extraordinary rise of American markets in recent months.

Most European markets ended on a downward trajectory, with investors reacting to the global downturn in technology stocks. The London exchange was one of the exceptions to this negative behavior, since it recovered from the initial losses. In addition to the technological sector, whose trend was influenced by the performance of the North American peers, the banking and automobile sectors were also under pressure.

The ADP employment report showed that 190 000 jobs were created during November, a level above expectations but lower than in October. For oil, the price of West Texas Intermediate traded in New York fell, after the unexpected increase of oil reserves in the country.

Last week the NZDUSD went back and forward without any clear direction but closed in the green, in the middle of the weekly range, in addition managed to close within the previous week range, which suggests being clearly neutral, neither side is showing control.

After years of crossing a long and winding desert the EU economy is finally displaying strenght beyond QE. The EU stock markets are not yet reflecting this new reality but they will.

European markets closed today’s session with losses, albeit contained. Today’s sentiment was fundamentally marked by the expectation of the FED meeting that ends today (but the outcome will only be known after the closing of European exchanges), as well as the ECB meeting scheduled for tomorrow.

In sectoral terms, trends were observed in different directions, with the positive result being the producers of raw materials and the negative effects of utilities. Among German utilities, Innogy fell about 13% after adjusting its forecasts for 2017. This behavior influenced the performance of RWE (-12.69%) and E.ON (-4.57% ).

The US market traded positively, with investors expecting the Fed meeting. The current FED meeting is the last meeting of the Yellen Presidency. Although the mandate of the current President will not end until February 2018, Janet Yellen will entrust the Central Bank with Jerome Powell, the newly appointed President of the Fed. Financial markets have already anticipated the near-steady increase of 0.25% in interest rates to 1.25% -1.50%. The focus will therefore be on two themes: the revision of the macroeconomic projections and the individual perspectives of each FED member for interest rates in 2018.

The US market declined, one day after the Fed’s decision to raise benchmark interest rates. The meeting of the Central Bank generally corresponded to the expectations of the previous day. The benchmark rates increased 0.25% for the 1.25% 1.50% range. This decision had two opposing votes, from the Fed Governors of Chicago and Minneapolis, who preferred a maintenance of reference rates. The content of the communiqué resembled the one from the end-October meeting, although it took an even more positive view of the economy and the labor market. In this positive view of the economy, the FED has improved its estimates for GDP growth to 2018, which is expected to be 2.50% from the 2.10% previously anticipated. Projections for the years 2019 and 2020 also improved to 2.10% and 2% respectively. Curiously, neither the press release nor the press conference made any reference to the impact of a possible tax reform. To remember that also yesterday, elements of the Republican Party reported having reached an agreement in principle on the fiscal package, with the Republicans of both chambers of the US Congress satisfied with the consensus of the versions proposed and approved in the House of Representatives and the Senate.

Concerning Final Tax Measure, expected to be voted on next week, one significant change from the Senate bill is that the rate reduction (to 21 percent from the current 35 percent) will begin next year, instead of being delayed until 2019. One should see a chaotic last few weeks of 2017, as companies try to best position themselves.