Oil price plunge strikes across the board
The plunge in the oil price is a big piece of lead around the neck of the global stock markets this morning. The FTSE is down 1% while most European gauges are doing worse as a major commodity and industrial firms are trading lower. A 7% loss of value in oil also affected the close on Wall Street and Asian markets this morning.
This week’s oil price drop has been only partially linked to the fundamentals of the market – the US reserves are relatively high and OPEC is unlikely to cut production after President Trump asked Saudi Arabia to stem any price increases – instead what started off as a moderate selloff ended up with a high volume of stop-loss selling. Brent is now trading at $65 and WTI is holding around $55.50.
Pound volatile after Brexit deal
The pound is in a volatile territory as Britain may be nearing a Brexit deal, or if not a deal, a showdown. Sterling-dollar volatility is now at its highest level since the UK election in 2017, up at 23%. The PM is bringing home a 400-page proposed Brexit deal hammered out with the EU which she will present to the Cabinet later today. This is where the fireworks start as various factions have already made statements on the deal even before seeing the actual text. There is little chance of a smooth currency market until the Brexit debate finishes.
In the best case scenario if Theresa May manages to get the deal approved by the Cabinet the exit deal could be ratified at a special European Council meeting on 25 November. In the meantime, the pound is marginally weaker against the dollar but marginally stronger against the euro as the common currency faces its own woes in the form of the unresolved Italian budget and concerns over the slowing German economy.