Crude markets are nervy ahead of the two-day OPEC+ meeting kicking off in Vienna today. Futures traded lower after an informal meeting on Sunday failed to reach agreement ahead of the main ministerial event. Crude oil prices have risen sharply through November on vaccine hopes that have spurred equity markets to their best month ever. However, near-term demand concerns over the winter still have the potential to weigh on pricing.
OPEC and allies are still expected to agree to a delay to the scheduled taper of production cuts, which are due to be reduced from 7.7m barrels per day to 5.7m in January, however there is always the potential for a surprise. In addition to delaying the taper for 3-4 months, OPEC+ members are also thought to be looking at a gradual scaling up of production from January. If there is no agreement to extend the current level of production cuts, an extra 2m bpd will come on stream in January. Whilst there seems to be broad agreement on extending current level of cuts for some time beyond the start of the year, the United Arab Emirates and Kazakhstan are thought to be dissenting. Saudi Arabia will flex its muscles to get a deal to keep a lid on output. WTI (Jan) slipped under $44.50 before paring losses. Shell and BP both fell over 2 per cent in early trade.
Stocks in Europe were broadly lower in early trade on Monday but still on course for one of the best months ever. Despite the soggy start the FTSE 100 reversed losses in the first hour to turn positive. The current trade seems to be about consolidating the rapid gains in November before looking for a potential Santa rally in December. Month-end rebalancing leading to negative flow for stocks may be a factor today, given the record runup in November. US futures point to a soft start on Wall Street after the four major indices all notched up gains on Friday. Again heading for close to best ever month.
Brexit talks enter another ‘make or break’ week. Whilst we have heard it all before, we are encouraged that both sides are close to achieving a deal. GBPUSD was steady in the 1.33/34 range traded last week ready to break on any announcement. Remember it’s heading to 1.20 as kneejerk reaction to no deal, 1.40 on a comprehensive trade package. The asymmetry reflects the fact traders are leaning towards a deal being agreed.
UK Company Announcements
| Lloyds Banking Group (LLOY) | The UK's largest bank has poached Charlie Nunn, head of HSBC's wealth and personal banking division, as its new chief executive. When his contract allows, he will take over from António Horta-Osório. |
| G4S (GFS) | GardaWorld has once again extended the acceptance deadline of its 190p per share hostile takeover of G4S in the hope of getting the deal over the line. Shareholders now have until 1pm on 16 December to accept the offer. G4S' shares are now trading close to 230p and we continue to recommend shareholders reject the bid. |
| AA (AA) | The roadside recovery group's largest investor has urged shareholders to reject a 35p-a-share bid for the company, arguing it "fundamentally undervalues the equity", according to a Financial Times report. We are not convinced. |
| Keystone Law (KEYS) | Like-for-like performance across the business is said to have bounced back to almost pre-pandemic levels. Adjusted pre-tax profit for the year to 31 January is now guided to come in “comfortably ahead” of company-compiled consensus of £4.6m. Keystone generated £5.8m of adjusted pre-tax profit last year. |
| Petropavlovsk (POG) | The new board at the Russian gold miner has appointed Denis Alexandrov, boss at Highland Gold Mining, as chief executive. Interim chief executive Maxim Meshcheryakov, who famously had to force his way into Petropavlovsk headquarters in August, will stay on in a “senior position”. |
| Tharisa (THS) | Sky-high palladium prices have seen the miner’s operating profit more than triple year-on-year to $88m (£66m). The company will also hand shareholders a 2020 final dividend of 3.5c, compared to 0.75c a year ago. |
| discoverIE (DSCV) | Revenue dipped by 6 per cent year-on-year in the six months to 30 September, to £218m, while underlying operating profit declined by 11 per cent to £16m. But momentum has been increasing, with orders and sales in the second half ahead of a year earlier. That improving outlook has seen the dividend reinstated and lifted by 6 per cent to 3.15p per share. |
| Draper Esprit (GROW) | While terrible for many sectors, 2020 has clearly benefited others. The technology-focused venture capital fund saw its net asset value per share increase from 555p to 600p in the six months to September - all before a £110m fundraise in October to accelerate portfolio company growth. |
| Civitas Social Housing (CSH) | Rental income was up 6 per cent during the six months to the end of September thanks to acquisitions and the indexation of rent rises. Dividends of 2.68p a share were paid, in line with management's target of 5.4p for the financial year. |
The US dollar gapped lower and traded below 91.70, the September low which was the weakest since Feb 2018 as real yields moved deeper into negative territory. There is not a huge amount of support through to 88. That weaker dollar story continues, which is +ve for global equities. EURUSD is approaching 1.20 – the line in the sand where the ECB starts to get all jumpy.
Neil Wilson is chief markets analyst at Markets.com
