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Dave Lutz, head of Exchange Traded Funds (ETFs) at JonesTrading, has a quick overview of what traders are watching on Thursday ahead of the US market open.
Oil prices are pulling back after a surge on Wednesday. Oil had spiked on news that OPEC – a cartel of major oil-producing countries – reached an agreement on the need to restrict its output. Traders have increased bets that the Federal Reserve will raise interest rates in December ahead of speeches from four officials on Thursday. Cleveland Fed President Loretta Mester said on Wednesday that persistently low rates could trigger a recession. The final estimate of second-quarter US GDP and weekly jobless claims highlight the data calendar for the day.
Good Morning! US Futures are retreating slightly, with the Russell off 10bp as Oil prices retreat slightly from yesterday’s surge. Euro markets are playing catch-up, with the DAX up 70bp with a surge for energy shares following yesterday’s jump in oil prices – Banks gaining in Europe, with DB adding another 60bp but well off overnight highs – The main weakness can be found in Travel-and-leisure stocks on higher energy costs. The FTSE is up 1% with the Miners ripping higher in London – While Saudi Rebounding 1% after a 10% whack the last 2 days. In Asia, Topix jumped nearly 1% as exporters reacted to the weaker yen – Australia jumped 1% on materials and energy – Shanghai climbed 40bp – Russia jumping on higher Oil prices, shrugging off Syria-US Angst – While India was the standout loser, hit for 1.7% after they launched air strikes at targets inside Pakistan.
The US 10YY is following Bund Yields higher, climbing upside yesterday’s peaks and nearing 1.6% and Fed Funds climb to 54% for December ahead of 4 Fed Speakers scheduled to speak today – Lockhart, Powell, Kashkari, and Yellen. The $ is making sharp gains against Yen as Japanese retail sales came in weak and Kuroda talked deeper negative rates. Despite the headwinds of a stronger $, Industrial metals continue to rally as Ore gains another 3% in China, Zinc climbs 30bp and Copper holds yesterday’s bid. Oil is retreating slightly as more analysts question the teeth of the OPEC announcement and Gasoline gets hit for 1% – Softs look well bid across the board.
Full slate of headers kicks off at 8:30am, with US GDP, Wholesale Inventories and Initial Jobless Claims – Just before Fed’s Lockhart speaks at 8:50 and Treasury Secretary Lew chatters at 9am. At 10 we get another headline dump with Pending Home Sales for August and Fed’s Powell speaks. 10:30 brings Natty Gas Inventory data. This afternoon sees Fed’s Kashkari speaking at 2pm, and Yellen speaking after the close (Bloomberg reports 4pm, but I have seen 4:45 from Reuters). Busy day in Washington, with the Supreme Court expected to issue new list of cases at 9:30, and WFC CEO Stumpf entering the Lion’s den of the House Financial Services Committee at 10am.