Over the weekend: OPEC on pace to lift limits, trade tensions draw action out of the PBoC

In comparison to recent weekends, it was a fairly sedate affair for the markets off-days, though headlines coming out of oil-producing nations, as well as continuing tensions both within and outside of the EU on trade and Brexit struggles are potential harbingers of sticking ponits for traders in the week ahead.

In the Pacific-Asia theater, the People’s Bank of China (PBoC) made a 50 basis point cut to the reserve requirements for key institutions in an effort to pump up lending to small and medium-sized firms. Chinese  stock indexes declined on Friday as trade war fears continue to force bullish traders to the sidelines, and China is taking proactive measures to keep liquidity flowing through their system.

In Japan, Prime Minister  Shinzo Abe is experiencing a slight bump in his polling numbers, with support for his ministerial cabinet lifting by almost ten percentage points to 52%, the measure’s highest reading in months. PM Abe’s approval rating suffered a blow earlier this year after key members of his cabinet admitted to forging documents involved in a land sale to a school developer with ties to Abe and his wife. Public support for the PM is bouncing back and his efforts working hand-in-hand with the Bank of Japan (BoJ) to re-introduce inflation to the Japanese economy continues to find strong support, despite a few key detractors who say Japan’s hyper-easy monetary policy may not be working as intended.

OPEC has seemed to reach a tentative agreement on crude production increases, though the exact figure has yet to be determined and announced, with Saudi Arabia pushing for a 1 million bpd  crude cap increase, and Iran pushing back with a suggested limit increase of no more than 770 thousand bpd.  

in Europe Brexit jitters within the UK continued unabated, with government Brexiteers lashing out against UK-based businesses that are increasingly unsatisfied with the lack of clarity on potential business operating conditions post-Brexit, with the UK’s Health Secretary Jeremy Hunt calling business’ ‘threats’ towards the UK’s government “completely inappropriate”.

The Bank of International Settlements (BIS) is warning that knock-on effects from the current trade tensions between the US and China are going to begin having side effects on currency markets and financial flows, with the BIS cautioning that a “very dangerous spiral” could easily have a negative impact on on global growth and financial stability. Despite this, the BIS is still maintaining the view that current trade tensions will be resolved peacefully and successfully, and that central banks will continue to move into more hawkish waters, with the US Fed expected to continue lifting rates and other major central banking institutions to begin reducing their current stimulus programs.