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Saudi Minister Says OPEC Base Case Requires All of 2018

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OPEC ministers extend oil-cut deal, huge data day in Europe, and investors look to what 2018 might bring. Here are some of the things people in markets are talking about today.

Crude deal

Oil ministers from OPEC member states and Russia have agreed to extend the current output cuts until the end of 2018, according to delegates in Vienna attending today’s meeting. Speaking at the opening of the conference, Saudi Arabia Energy Minister Khalid al-Falih emphasized the continuing need to see global inventories fall. Crude reversed some of yesterday’s fall, with a barrel of West Texas Intermediate for January delivery trading at $57.50 by 5:20 a.m. Eastern Time. 

Euro data

Policy makers at the European Central Bank will be disappointed to see Eurostat’s flash inflation estimate for November coming in below expectations at 1.5 percent, with core inflation remaining unchanged at 0.9 percent. Unemployment in the euro area slid to 8.8 percent in October, the lowest in almost nine years. In Germany, the jobless rate held at a record low of 5.6 percent while retail sales unexpectedly declined 1.4 percent from a year ago. The Spanish economy’s strong third-quarter performance was boosted by investment, while data showed that the Catalan crisis damaged tourism in the region. In the U.K., house prices rose 0.1 percent in the last month. 

Look ahead

It’s the time of year where investment houses turn their attention to what 2018 might bring. Yesterday, Goldman Sachs Inc. warned that current asset valuations show markets are possibly set for a painful return to earth. Credit Suisse Group AG strategists said that the clock is ticking on the global equity rally, which they see running out of steam in the second half of next year. Morgan Stanley, for its part, says it might be time to get out of credit markets, predicting underperformance in Asia, Europe and the U.S., while JPMorgan Chase & Co. says that cash will dethrone government bonds to post its best return since 2012 next year. In short, 2018 bulls are a rare breed at the moment.

Markets rise 

Overnight, the MSCI Asia Pacific Index fell 0.9 percent as Tencent Holdings Ltd. and Samsung Electronics Co. led regional tech stocks lower following yesterday’s U.S. drop. Japan’s Topix index closed 0.3 percent higher. In Europe, the Stoxx 600 Index was 0.6 percent higher at 5:50 a.m. with all sectors gaining. S&P 500 futures added 0.3 percent, the 10-year Treasury yield was at 2.385 percent and gold was slightly lower. 

Tax debate

The GOP Senate tax bill is looking like a good compromise – insomuch as it effectively has something for every Republican to be unhappy about.  More changes may come over the next couple of days as the bill is refined to ensure sufficient support. Most of the party’s Senators say that they will probably vote in favor nonetheless to meet the goal of holding a final vote by the end of the week. The legislation could prompt salary changes for U.S. workers within two weeks of its enactment.  

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