Face-to-face Brexit talks resume, FTSE is the laggard

Face-to-face (or is that mask-to-mask?) Brexit talks are to resume in London this weekend, perhaps indicating a last drive to get a deal agreed.

EU chief negotiator Michel Barnier, who is travelling to Britain this evening, called for an ‘urgent’ meeting of European fisheries ministers today ahead of the resumption. Given that this has been one of the three main barriers to agreeing to a trade deal, a meeting of this kind so late in the day may indicate there is a broad framework agreed with the UK, at least on fishing rights.

Barnier is still playing it cool, with a flash this morning saying he told EU national envoys he cannot say at this stage whether a deal is possible. One senior diplomat said Barnier’s presentation was ‘not a particularly bright picture’. I take all this with a pinch of salt – a usual underplaying of the hand as the real work is progressing behind closed doors.

Although it may be a little early to call this, with the fisheries meeting and resumption of in-person talks, there could be a statement over the weekend when markets are closed that is material, which may lead to gapping on Sunday night when FX markets reopen down under.

Cable was steady in the middle of the 1.33-34 region this morning. The exact timing of any announcement is still a question, but GBP support thus far indicates the market has a positive view – big downside risks if it’s no deal. Upside to 1.40 perhaps on a comprehensive trade deal. It’s crunch time for GBP, while USD is starting to bite. DXY retains a bearish bias under 92 as it grinds towards the key horizontal support at 91.70.

European stocks edged a little higher though the FTSE 100 dropped again ahead of Black Friday curtailed session in the US later. European bourses moved tentatively higher but the UK market was the laggard in early trade, sliding almost 1%. The NYSE closes at 1pm eastern time, with the bond market shutting an hour later. Largely we are in a holding pattern until we get greater direction on the pace and durability of a reopening next year. AstraZeneca says it will carry out further global trials after doubts were raised about the results of its clinical trials announced this week.

Economic data is light today, but China’s industrial profits rose 28% in October, rising at the fastest clip in nine years. Black Friday might get some attention for the likes of Amazon, Asos, AO World etc, but it’s all a swizz. Most of the so-called deals are not real deals. Hats off to Next, M&S, Wilko and B&M for not taking part in this dreadful US import.

Oil moved lower ahead of next week’s key OPEC+ meeting in Vienna. WTI (Jan) eased back to take a $44 handle, having risen above $46 earlier this week after EIA inventories on Wednesday showed a surprise draw. The rally through November has closely matched that of the equity market recovery and rotation, which suggests it is largely being driven sentiment and an improving economic outlook next year.

OPEC and allies are expected to delay the planned 2m bpd taper in January for three months. With prices having stabilised, the requirement to do more than that has diminished: 2.2m less production over three months buys time and allows optionality to extend if required. As ever, there is uncertainty over the decision that may affect prices near-term. Beyond OPEC+, watch those gasoline inventory builds and possible move towards tighter restrictions in the US as Covid cases keep rising.