Is there any wonder that investor fatigue started to set in on many asset classes last week? Not only having to consume, analyse and react to the reams of data witnessed over a busy 5-calendar day period, there is of course always the consideration of what the great and mighty of governments, their formal political oppositions or in some cases battlefield foes, decide to pour forth in word form for the world’s ready media to gobble up and banner. For oil prices it is worth reminding ourselves on Monday there was an abandonment of risk due to the so-called measured response Israel meted out on Iran during the previous weekend’s strike. Such was the relief that WTI and Brent M1 prices ‘gapped’ lower and ended the day 5% for the worse. No matter the understanding this was obviously due to pressure brought to bear by the United States, which really could do without Middle East sentimental interference into a fraught Presidential campaign. The evidence of proportionality from Israel and the dialled down rhetoric from Tehran and Tel Aviv, evaporated war fear, giving the oil community ability to express something of growing belief that all is not well with fundamental oil demand. However, this latest chapter in the millennia of Middle East saga is not done with, and after a whipping up by radicals in the Iranian media, as discussed in Friday’s missive, Iran seemed set to launch another attack on Israel, something that found concurrence from Israel and the US. Subsequently, and after threatening October and the year-to-date lows of September, WTI and Brent clawed back all the losses experienced on the week, Heating Oil and Gasoil actually broke above the highs of the previous week before all experienced a late-in-the-day rethink of exactly how much an attack by Iran via an Iraqi proxy, for that is what was now being expressed, could mean. Once again as the rekindling of war premium began to stutter, thoughts turned to oversupply which were given extra meat on various fronts but particularly those of North America. Production in the US once again registered a new high in August of 13.4mbpd. All-time high output from Texas and from New Mexico can be seen confirmed with Exxon’s results of Friday where its Oil and Gas production is announced as up 25% year-on-year. North of the border, Imperial Oil, Canada’s second-largest oil company produced 447,000 barrels of oil equivalent per day up from 423kboepd from the previous year. Eventually, M1 futures for the main oil futures contracts finished lower; WTI -$2.29/barrel (-3.19%), Brent -$2.95/barrel (-3.88%), Heating Oil -0.39c/gallon (-0.17%), RBOB -11.20c/gallon (-5.39%) and Gasoil -$4.25/tonne (-0.63%). Oil prices are set to remain variegated by the prickles of the Middles East and the slippery effect of there being more oil at present than the world needs.

Things were no less tricky in the wider macro suite. Its calendar served us with many nations’ economic data, but its time was competed for by the results of the Mega Caps. Staying with Google, Microsoft, Meta, Apple and Amazon for the moment, earnings reports were mixed. Not in just how each compared, but with how the forward forecasts seemed to take more importance from investors than actual income. It is a modern phenomenon where investors expect stellar quarterlies at each measure, and when that is unfulfilled there ensues a tantrum. What stood out as the main concern was/is forecasted spending on AI is set to increase and because it is still early on in how AI is adopted, with the benefits promised for health, manufacturing, financials and technology itself remain something of nascence, the S&P500 experienced gyration and lost all the gains it had made in October. Still, you cannot keep a tech-bull down, and the mini-recovery seen on Friday continues to show intent even though volatility is set to be heightened with the US election. The noise in markets has largely drowned out the many data sets produced. In the Eurozone, markers such as Business Climate, Economic Sentiment, Industrial Confidence and Consumer Confidence give evidence of a continent that continues in restriction and while preliminary GDP readings were slightly higher, growth of 0.4% quarter-on-quarter and 0.9% year-on-year it is not the stuff of boom. The ECB must continue to trim interest rates to pull Europe from the mud, but the CPI year-on-year reading of 2.7% is very much unwelcome. Europe’s growth indeed, compares poorly with the YoY GDP Advance of the US at 2.8%, even being lower than the 3% forecast. Yet, the US is not without worries. Personal Consumption Expenditure (PCE) continues to show tolerance to inflation even with the mixed employment data fielded. There seems little chance of anything other than a 25-basis point cut from the next Federal reserve decision which is being priced by the CME FedWatch tool at near 100%. Industry dogs the idea of growth in the world. Manufacturing PMIs across the globe are frankly abject, and while much is made of both China’s NBS and private Caixin retuning above 50 and slight expansion, they are easily countered with Friday’s US ISM Manufacturing PMI of 46.5 and the UK’s which slipped into contraction. The market remains ever-hopeful on a decision by China’s National People's Congress concerning stimulus to the tune of CNY10 trillion, but until rumours are replaced by fact doubt will creep. Franky, this small list of some of the week’s influence as trimmed, but everything remains only semi-absorbed. Highlighting this is the US Non-Farm Payrolls of Friday. As much as hurricanes and the like may be blamed, growing jobs by 12,000, rather than 113,000 as expected ought to have given more reaction. Depending on one’s point of view, the data should offer an easier employment situation encouraging the FED, or it as an indication of a cooling economy. But, by the time of its publication, markets en-masse seemed to have had enough. Across the world there might have been a faint breeze felt as the revolving doors of investment offices spun in exodus of market communities running away from a Middle East war, a full unrealised data docket or the insidiousness of the biggest 2024 influence of all, the US election.

...and for today and this week

Oil prices show a firm first footing inspired by news from OPEC+. In response to the current plight of prices and the continued news of more production from outside of the Declaration of Cooperation (DoC), the group has decided to delay the small re-introduction of 180kbpd cut by one month. The market reaction is understandable in the twitchy context of a threatened attack from Iran into Israel and the US election, but on closer consideration the move is defensive. The amount of oil is insignificant, but presumably from OPEC's perspective it buys a touch of time and allows the oil market to fester a notion that there might be a possible change of heart in the overall plan to bring back 2.2mbpd of oil from voluntary cuts. 
This week, as with the last, there are some big-ticket data and decisions to look forward to that once again will be lost to the reverberation of how markets react to a Harris or Trump victory. Central banks worked in unison when tightening policy but there is some deviation as the eventual loosening unfolds, therefore, it will be interesting to see how Sweden's Riksbank, Australia's RBA and the UK BoE go about trying to breathe life into economies. There probably will be few surprises as will there not in the FOMC decision on Wednesday. The CME FedWatch tool does not think so, it has pricing for a 25-basis point cut at 99.9% and because of the ordinariness of the likely decision, analysis, digestion and forward predictions from markets and commentators will be stifled. As will the Chinese NPC decision on stimulus. There is an interesting piece in the WSJ this morning that pours a touch of scorn on the idea that 'bazooka' stimulus is more likely to counter a Donald Trump election win. Not only are authorities not ready to move on a financial change of course, but the idea of China also sloshing money around domestically might just be antagonistic in a world closing in on trade war. We have always viewed the US election as the biggest event of 2024, well here it is, and we have not changed our mind.
 

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