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OPEC has delayed a decision on tapering production cuts after failing to reach agreement on the first day of the cartel’s biannual ministerial meeting. OPEC ministers were due to speak with Russia and other allies today, the second of a two-day meeting, to agree a plan on how to proceed with output restraint that has helped to stabilise the oil market after a tumultuous spring that saw WTI go negative at one point.

Those talks have been delayed until Thursday to allow more time for discussions to take place. It looks as though OPEC wanted to have a collective stance before discussing with allies, however, some members are holding out against Saudi Arabian demands to delay the taper of 2m bpd in January. The UAE wants countries who have exceeded quotas to catch up before agreeing to an extension, while Russia seems to favour a gradual increase in output from January, albeit less than 2m bpd from day one.

OPEC+ agreed in April to reduce output by around 10m bpd, or about 10% of global supply. Prices stabilised but then stagnated over the summer in a tight range before rallying sharply over the month of November on vaccines hopes. The lack of agreement on Monday underlines the tense relationships within the cartel at a time of severe stress on oil demand due to the persistence of the pandemic and lockdown measures. Whilst on balance it still looks as though OPEC+ will agree some extension of the current cuts, worth 7.7m bpd, it will not do anything to inspire confidence in the cartel’s ongoing ability to stabilise oil markets. Prices were moving around a bit on the flashes but as of this morning WTI (Jan) was steady at $45 with Brent holding above $47.

Global stock markets enjoyed a spectacular November, with the Dow Jones notching its best month since 1987 and the Euro Stoxx 600 enjoying its best month ever or at least since records began I 1986. Even the laggard FTSE 100 got in on the action, rallying over 12% for its best month 31 years. The value rotation sent the Russell 2000 to its best month on record. A little end-of-month tidying of positions and profit-taking left shares lower for the day, with European bourses and US futures trading higher this morning. We can allow that given the extreme moves over the month.

For European and UK equities, December is starting in the same vein as November and we are seeing a positive reflation trade in play this morning as countries race to approve Covid vaccines. Britain may be the first to approve the Pfizer-BioNTech vaccine and jabs could be on offer by the weekend. Financials and Basic Materials led the charge on the FTSE 100 as the blue chips climbed over 1% in the first hours of trade with Lloyds and Natwest +4%, HSBC +3%. GOAT favourite IAG rose 5%, with Compass +4%. Meanwhile, in European banks, UniCredit shares slipped sharply again as the CEO Jean Pierre Mustier stepped down, with sources citing a rift with the board over strategy for the sudden departure.

Royal Mail shares rose another 3%, meaning it has doubled since the end of July. Liberum is the latest broker to get more positive after the company reported a surge in parcel volumes and moved closer to ending Saturday post. Fair play to Citigroup for issuing a double upgrade back in April from sell to buy on the expected volume increase in parcels due to online shopping.

Shares in pandemic work from home winner Zoom fell around 5% after-hours as the company hinted at slowing revenue growth, even as it beat market expectations for earnings per share. The company delivered EPS of $0.99 vs $0.76 expected, whilst revenues of $777m beat the $694m forecast.

The dollar remains subdued but didn’t crack after breaching 91.70 and is holding this level for the time being. EURUSD failed to sustain a move past 1.20 but the dams may be open and bulls will have another crack. GBPUSD has held in its 1.33-1.34 range with markets preparing for news either way on Brexit. We may see traders increase long positions on expectations of a deal being achieved.

Real yields keep moving lower, with the US 10-year Treasury Inflation Protected Securities (TIPS) moving to –0.93. The move in real rates ought to be supportive of gold but hasn’t been yet – will we see a mean reversion with gold moving up again soon? After the seasonal selling into Thanksgiving, there could be some dip buying. US ISM manufacturing PMI later see at 57.9 vs 59.3 last time, whilst we are also looking to Fed chair Jay Powell testifying before Congress later.

Chart: Gold (inverse) vs 10-year TIPS – recent divergence may not last:

Gold's recent divergences may not last.

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