30 Nov A QUIET DAY FOR EQUITIES AND TREASURIES…
Third quarter GDP was revised to 3.2% rate from the previously reported 2.9% pace, the fastest growth in two years. Business investment remained weak but labor market progress and steady household purchases kept growth on tract ahead to the holiday shopping season.
As inferred above, the revised growth figure mainly reflected changes to the pace of consumer spending, growing at a 2.8% annualized rate versus the initial reported pace of 2.1%.
The increase in consumer spending is reflected in the robust consumer confidence data, rising to the highest level in more than nine years.
Inventories—a measure of confidence—added to growth for the first time since early 2015.
The data further confirms the inevitable…an interest rate increase in December.
The statistics had little impact on the markets as equities were quietly higher and treasuries were essentially unchanged.
Oil however ended about 3.5% lower as the headlines are suggesting a low probability of a production cut. How will the OPEC drama unfold today?
OPEC is hemorrhaging monies. The IMF suggests if Saudi Arabia is unable to reduce social spending by its stated amount of 20% by 2020 and if oil remains at $45/barrel, the kingdom would be bankrupt in four years.
Iran—a country that is used to living in difficult conditions because of long lasting sanctions—stated its currency has plummeted about 10% in less than 10 days. Will Iran be forced to devalue; something that some suggest Saudi Arabia is in the verge of doing?
Devaluations cause great economic displacements.
Will history write that today’s OPEC meeting was the most significant in its history? Maybe.
What will happen today?
Last night the foreign markets were up. London was up 0.89%, Paris up 0.66%, and Frankfurt up 0.29%. China was down 0.16%, Japan up 0.01%and Hang Sang up 0.23%
The Dow should open nominally higher as oil is up over 7% on speculation that OPEC will cut production partially predicated upon Iran’s comments that a deal will be made without Iran cutting production. The 10-year is off 15/32 to yield 2.35%.