Crude Oil To Open Higher, Focus on Fed and Yellen’s Remarks
U.S. stock market closed higher on Friday, after having set a string of record highs since the victory of the President-elect Donald Trump who pledged to bolster the world’s largest economy by increasing infrastructure spending, lowering taxes and loosening regulations.
At the close in NYSE on Friday, the Dow Jones Industrial Average gained 0.72% to hit a new all-time high at 19777.00, S&P 500 index climbed 0.59% to finish at 2259.54 while the NASDAQ Composite index gained 0.50%.
Coupled with a raft of pro-business policies by Trump, the broad-based rally was also supported by upbeat economic data. The University of Michigan’s report on consumer sentiment, a gauge of confidence in the economy, rose to 98.0 in December. The reading was just one-tenth of a percent from a cycle high recorded in 2015, which was the highest since 2004.
For the next week, investors will be looking at clues from the U.S. Federal Reserve on how aggressive the central bank will hike rate next year amidst little doubt that the Fed will raise interest rates for the first time in a year on Wednesday. The Fed remains the sold central bank that is considering tightening its monetary policies against the background where others are mulling over more easing or keeping policy steady for a long period of time.
While markets are pricing in a near 100 percent chance for a quarter percentage point increase at Fed’s final meeting of 2016, President Janet Yellen’s guidance on a timetable for future tightening is eagerly expected when the U.S. central bank meets next week.
On the data front, major reports from the U.S. will come out on Wednesday and Thursday. The U.S. is to release data on retail sales on Wednesday. Retail sales are forecast to have advanced by 0.3% in November after a larger than expected 0.8% increase in October. A chain of data, including reports on consumer prices, jobless claims and manufacturing activity in both the Philadelphia and New York regions will be published on Thursday.
Additionally on Thursday, investors will also be focusing on a news conference U.S. President-elect Donald Trump for any hints about his economic policy plans.
Besides the Fed, the Bank of England and the Swiss National Bank are two other banks that are expected to keep its key rate steady at their policy-setting meetings on Thursday.
The euro dropped to as low as 1.05300 on Friday before paring some losses to close at 1.05551. The European Central Bank extended its asset purchases, albeit at a slower pace, on Thursday. Considering uncertainties from both inside and outside the 28-nation bloc namely Brexit, the U.S. election and the Italian referendum, the ECB decided to expand its quantitative-easing program to exceed 2.2 trillion euros ($2.4 trillion) by the end of 2017. However, the monthly pace will be reduced to 60 billion euros ($65 billion) a month from 80 billion euros currently.
According to the statement, the Governing Council may “increase the program in terms of size and/or duration” if the outlook becomes less favorable or if financial conditions become inconsistent with further progress toward a sustained adjustment of the path of inflation”.
The Canadian dollar, on the other hand, rose steeply on the back of the rebound in oil prices and the fact that the Bank of Canada left rates unchanged last Wednesday.
Crude prices are expected to start next week with a sharp jump after producers from outside the OPEC agreed to reduce output following a production cut deal by the 13-country group. Another 558,000 bpd will be slashed from global supplies after OPEC agreed to trim its production by 1.2 million barrels per day from Jan. 1. Top exporter Saudi Arabia had pledged to reduce as much as 486,000 bpd and may cut even deeper, Saudi oil minister Khalid al-Falih said after Saturday’s meeting.
Top non-OPEC producer, Russia, will cut 300,000 bpd.