US futures are slightly in the red ahead of the open on Tuesday, despite a broadly positive session being seen across Asia and Europe.
As we head into the middle of the month, the much talked about – and very much sought after – Santa rally is looking increasingly unlikely, with risk appetite becoming more depressed by the day and the outlook for the global economy looking more challenging. We’re now seeing daily commentary it seems about the progress of talks between the US and China but the reality is that this is going to be a process that moves at a glacial pace but the fact that talks are happening are a reason to be optimistic.
May returning to Brussels cap in hand
On the day that the UK was meant to be voting on Theresa May’s Brexit deal, the PM is instead off to Brussels in a last ditch attempt to save her deal – and job – and draw one final concession from the EU on the backstop agreement. Officials have thus far been adamant that the current deal is the best and only option on the table but May will be hoping that the block won’t engage in a game of chicken with the UK parliament that unintentionally leaves us with no deal.
The inclusion of a unilateral withdrawal from the backstop under certain conditions seems the only way of saving May’s deal at this late stage. If she fails to come back from Brussels with it, that could set in motion a series of events that creates huge uncertainty at the most illiquid time of year in the markets which makes for a potentially chaotic few weeks, with a leadership challenge, no confidence vote in the government and second referendum calls all on the table. Perhaps this will be viewed in Brussels as a risk worth taking, with a potentially plunging pound piling further pressure on the UK government.
Oil vulnerable, Gold bullish ahead of Fed meeting
The boost from the OPEC+ output cut did last long for oil prices, with Brent and WTI both trading back near their pre-meeting lows. Whether this is a case of the agreement under-delivering compared to market expectations, doubts about its ability to put a dent in the oversupply or the group’s ability to deliver, prices are once again looking vulnerable and a break below $58 in Brent and $50 in WTI could be the catalyst for another wave of selling.
Gold is ticking higher again, having held above $1,240 at the first time of asking on Monday as the dollar benefited from the Brexit shambles and weighed on the yellow metal. I remain quite bullish on Gold a week before a Fed meeting in which a rate hike is no longer the guarantee it looked a couple of weeks ago and the central bank is expected to adopt a less hawkish tone than it has for some time. The only thing that stands in its way, it seems, is a collapse in negotiations between the US and China and/or the UK and Europe.
