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World Week Ahead: Eyes on OPEC, US debate

Monday 26 September 2016 08:21 AM

World Week Ahead: Eyes on OPEC, US debate

By Margreet Dietz

Sept. 26 (BusinessDesk) - The Organisation of Petroleum Exporting Countries will meet in Algiers today, with investors watching to see if an agreement on limiting oil output can be reached in an effort to ease the global glut and bolster prices.

On Friday US West Texas Intermediate crude futures slid 4 percent to US$44.48 amid concern Saudi Arabia and Iran won’t be able to break through a stalemate when it comes to a production freeze. Both nations are key members of OPEC.

“A 'No Deal' result in our definition will be one where OPEC not only failed to get an explicit deal out of the meetings but also failed to develop a forward plan," Macquarie Capital said in a note, referring to the Algeria talks, Reuters reported. “This would be another epic fail by OPEC.”

Citigroup predicts that oil prices may struggle to hold above US$40 a barrel unless OPEC acts, Bloomberg reported.

Beyond the oil market, the focus will be on an array of US Federal Reserve officials who are poised to speak this week.

Fed Chair Janet Yellen is among those scheduled to speak.

Last week, the Federal Open Market Committee kept its key rate steady but signalled a potential hike in December. Three policy makers dissented because they would have preferred an immediate quarter-point hike.

“The Fed’s decision was positive short-term, but we’re still going to have a rate hike and the consensus is still going for December,” Christoph Riniker, the Zurich-based head of strategy research at Julius Baer Group, told Bloomberg.

Yellen is set to speak on Thursday, though she will first testify on regulation and supervision before the House Financial Services Committee on Wednesday. Before then Fed officials slated to speak include Fed Minneapolis President Neel Kashkari and Dallas Fed's Robert Kaplan, today; St Louis Fed's James Bullard, Chicago Fed's Charles Evans, Cleveland Fed's Loretta Mester, and Kansas City Fed's Esther George, on Wednesday.

Investors will also eye the first of three US presidential debates today between Democratic candidate Hillary Clinton and Republican candidate Donald Trump.

"We're probably looking at a modestly positive week pushing the high end of the S&P 500, unless something comes out of the debate that spells real success for Trump," Phil Blancato, chief executive of Ladenburg Thalmann Asset Management in New York, told Reuters. "The market seems to favouring the 'known' of Hillary rather than the 'unknown' of Trump."

Last Friday the Dow Jones Industrial Average dropped 0.7 percent, while the Standard & Poor’s 500 Index shed 0.6 percent and the Nasdaq Composite Index also declined 0.6 percent as energy stocks followed oil lower. Apple and Facebook also weighed on the benchmarks.

For the week, the Dow advanced 0.8 percent, while the S&P 500 rallied 1.2 percent and the Nasdaq also climbed 1.2 percent.

US Treasuries posted their best week since July, with yields on the 30-year bond dropping ten basis points during the week, according to Bloomberg.

The latest US data will show up in the form of reports on new home sales, and Dallas Fed manufacturing survey, due today; S&P Case-Shiller home price index, PMI services, consumer confidence, and the Richmond Fed manufacturing index, due Tuesday; durable goods orders, due Wednesday; the third estimate for second-quarter GDP, international trade in goods, weekly jobless claims, and corporate profits, due Thursday; as well as personal income and outlays, Chicago PMI, and consumer sentiment, due Friday.

In Europe, the Stoxx 600 Index retreated 0.7 percent on Friday.

European Central Bank President Mario Draghi is slated to speak today in Brussels.



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