It’s not been the most exciting week in stock markets and we’re heading for a relatively chilled end to it, with Europe marginally higher and US futures flat ahead of the open.
The mid-summer drag has well and truly taken hold as investors prepare for a bumper end to the year. This is obviously no ordinary year but it’s still be a pretty quiet summer compared to the rest of 2020 – although that’s not hard, is it – and the final months could deliver a huge US relief stimulus, Covid vaccine and a feircely fought election. Perhaps a breather is what we need.
There haven’t been any major developments this week, rather a series of minor updates to keep everything ticking along. The Fed and ECB are cautious about the outlook, OPEC+ agrees and Brexit talks aren’t making any real progress.
Brexit talks going to the wire, shockingly
Negotiators from the UK and EU went into talks this week hopeful of tackling some of the more contentious issues that stand in the way of a Brexit deal, most notably fishing rights and level playing field. As we’ve seen so often before, both sides have left the talks seemingly frustrated with the others refusal to cede ground on various points but still hopeful of a deal. The UK side sounded optimistic on a deal in September, while Barnier stressed the need to have it wrapped up by the end of October in order to be ratified by the end of the year. So naturally, we’re still going to be talking about “crunch talks” in November. The pound is slipping off its highs today but that’s primarily a safe haven driven move, with the currency flat against the euro but off against the dollar, yen and swissy.
Oil slips on stronger dollar
Oil prices are down 1% on the day, dragged lower by the bounce in the dollar and the softening in risk appetite at the end of the week. Still, we’re not too far from the range highs in crude, the question is whether it can be sustained in the face of the spiking Covid cases around the world. OPEC+ struck a cautiously optimistic tone this week while sticking to small increases in output this month. US production has continued to decline but with oil back above $40, can we really expect that to last? A weaker dollar will naturally help support prices.
Gold edging lower as real yields bounce back
Higher real yields in the US took the energy out of the gold bounceback midweek and it’s struggling to pick itself up, with the yellow metal down around half a percent today. The rebound in the dollar is naturally making life difficult for gold but the greenback did break through significant support earlier in the week so remains on a bearish trajectory. That’s good news for gold. Of course, if the dollar index can quickly pick itself up and break above 94, that may change things.
