Oil rises ahead of the OPEC+ meeting – Daily Market Brief, October 5, 2022

OPEC+ is expected to cut oil production in today’s meeting, possibly by 1 million barrels per day. Oil trades 8% higher this week, ahead of the meeting.

·         AUD/NZD falls as the RBNZ hikes rates by 50bps after the RBA hiked by a smaller 25bps

·         Eurozone composite PMI data is expected to show a deeper contraction in September

·         Twitter jumped in late trade yesterday as Elon Musk revives his bid

Global stocks jumped sharply higher yesterday, with the S&P500 booking its best two-day rally since March 2020 and Europe experiencing its strongest daily gains in six months. Falling US job vacancies helped boost the market mood, marking a second day weaker than forecast data provoked a strong risk-on response.

However, hopes that the Federal Reserve would adopt a less aggressive approach to raising interest rates appears premature. Fed speakers put the market back on track, insisting that the central bank will keep hiking until the job is done, comments which pulled US futures lower after the close.

RBNZ

The RBNZ hiked rates by 50 basis points, taking the OCR to 3.5%, its highest level in seven years. The RBNZ failed to follow in the footsteps of the RBA, which slowed the pace of increases, hiking by a smaller-than-expected 25 basis point hike, a move that helped to lift demand for riskier assets. AUD/NZD is trading -0.45% lower at the time of writing.

A fall in US futures after the close, combined with the hawkish RBNZ, is putting Europe on track for a slightly lower open. The DAX, after closing 0.7% higher yesterday, is set to open -0.5% lower today. The FTSE closed 0.3% higher yesterday and is set to lose -0.4% on the open today.

PMIs

The main focus of the European session will be on PMI data. The European composite PMI is expected to show that business activity contracted further in September, falling to 48.2, down from 49.8. The level 50 separates growth from contraction.

Looking ahead in the US session, the ISM services PMI is expected to show continued strong growth of 56 in September, just down from 56.9 in August. ADP payrolls will also be under the spotlight ahead of Friday’s non-farm payrolls.

Twitter

Twitter jumped in late trade yesterday after Elon Musk surprised the market by saying that he would buy the business and honour the original deal. Musk is set to proceed with the $44 billion buyout, potentially avoiding a courtroom fight. The U-turn comes after Musk has spent months trying to get out of the contract to buy Twitter amid claims that management misled him over the size of its user base and bot accounts.

OPEC+

Oil prices are rising in early trade, adding to 8% gains already this week ahead of the OPEC+ meeting today. The oil cartel, which will meet in Vienna, is widely expected to cut oil output by up to 1 million barrels per day, marking the largest production cut since the pandemic. Oil prices have fallen around 30% since June, prompting the move by OPEC even though inventories remain tight. However, some OPEC+ members are already producing less than their production quota, meaning that the impact of any cut will be dulled slightly.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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