MORNING OVERVIEW
Saudi Arabia has ramped up oil production following the restoration of their oil pipeline, according to Reuters. The increased oil production may have alleviated supply chain concerns on the global oil market. In Europe, the continued defeat of Germany’s ruling CDU party in local elections has raised concerns over the bloc’s proposed €2tn budget, as the nation’s political future is called into question. Moreover, ECB Chief Economist Lane stated that energy prices could lead to higher and more persistent inflation.
MARKET SNAPSHOT
| MARKET | CURRENT | CHANGE | COMMENT |
| S&P 500 | 7761 | -0.04% | Companies received upgraded valuations |
| DXY | 100.487 | +0.06% | FOMC speakers |
| EUR/USD | 1.1456 | -0.07% | EU consumer confidence figure today |
| Gold | 4313 | -0.68% | N/A |
| Brent Crude | 101.36 | +1.02% | Saudi increases oil production |
KEY MARKET THEMES
01 — Saudi Arabia increases oil production
Saudi Arabia, according to Reuters has ramped up their Gulf oil exports, following the restoration of their oil pipeline which was attacked by Houthi Rebels. The report that oil exports have risen may alleviate market concerns regarding the oil supply constraints that are being faced on a global level. Therefore, as supply increases, oil prices may have faced downwards pressures. Moreover, should it appear that Saudi Arabia is able to continue increasing their oil production, oil prices may face continued downwards pressures. However, not all is peachy as it has been reported that Houthi fighters are pushing to seize strategic heights in Yemen which could further complicate matters in the region. Nonetheless, on a general level should the oil supply increase from the region, it could weigh on oil prices.
Market implication (OIL): BEARISH
02 — ECB Lane raises worries about prolonged inflationary pressures.
ECB Chief economist Lane, during an interview with Le Temps stated that “we are no witnessing a second wave of prices, not only in oil but also in gas” and that “we believe this second wave of energy price rises should lead to higher and more persistent inflation, before a decline toward our target from mid-2027 onwards”. The comments by the ECB’s Chief economist could be perceived as hawkish in nature, with worries about heightened inflationary pressures possibly leading to a more aggressive ECB in their monetary policy stance i.e rate hikes. In turn the comments by ECB Lane could aid the EUR, with the common currency possibly gaining support should further policymakers imply a willingness to hike rates in the near future.
Market implication (#EUR): BULLISH
03 — German Chancellor Merz’s woes continue
German chancellor Merz’s woes continue as his fate is now on the line following the CDU’s disastrous performance in Germany’s regional elections. The failure of the CDU in the regional elections has led to speculation as Germany’s political capital in Brussels declines. The reason is that the current chancellor’s political party appears to be losing support at home and thus the possibility of a new chancellor increases, leaving the EU in a bind as to whether it will be able to push the €2tn budget through. The view is that the current chancellor may have to make concessions or a new chancellor could bring opposition to the budget. Nonetheless, political instability in Germany could weigh on the EUR.
Market implication (EUR) : BEARISH
WHAT MATTERS TODAY
EU preliminary consumer confidence figure (September)
- Time (GMT+2): 17:00
- Expected: -16.0
- Previous: -15.5
Potential market reaction:
Could weaken the EUR
FOMC William’s speech
- Time (GMT+2): 17:05
- Expected: N/A
- Previous: N/A
Potential market reaction:
N/A
WHAT MATTERS TOMORROW MORNING
Australia’s preliminary manufacturing PMI figure (September)
- Time (GMT+2): 02:00
- Expected: N/A
- Previous: 52.70
Potential market reaction:
Any figure > 52.70 could support AUD
ASSET FOCUS
[OIL / COMMODITIES]
Oil prices appear to be moving in a sideways fashion after bouncing off our 91.25 (S1) support level. We would opt for a sideways bias for oil prices and supporting our case is the RSI indicator below our chart which currently registers a figure near 50, implying a neutral market sentiment. Although we should note that our upwards moving trendline remains intact. For our sideways bias to be maintained we would require oil prices to remain between our 91.25 (S1) support level and our 99.30 (R1) resistance line. On the flip side for a bullish outlook, we would require a clear break above our 99.30 (R1) resistance line, with the next possible target for the bulls being 105.60 (R2) resistance level
KEY LEVELS
- Resistance (R1): 99.30
- Resistance (R2): 105.60
- Support (S1): 91.25
- Support (S2): 84.75
Technical View: NEUTRAL
CROSS-ASSET VIEW
| ASSET CLASS | BIAS | KEY DRIVER |
| Equities | Bullish | Major companies received upgrade valuations |
| USD | Bullish | Inflation |
| Gold | Bearish | Dollar |
| Oil | Neutral | Trump’s willingness to meet with Iran’s President at the UN |
RISKS TO THE VIEW
The US striking Iran during the UN General Assembly or vice versa
The biggest risk to our view is still the US and Iran rapidly escalating hostilities with one another during the UN General Assembly. Doing so could upend our view’s immediately.
TRADING SPHERE VIEW
Bearish for oil
Our base case:
Despite rhetoric emerging on Sunday with Iran and the US pointing their ‘knives’ at each other’s throats, President’s Trump’s willingness to meet with the Iranian President during the UN General Assembly may take precedent and thus should the two leaders meet and discuss any framework for the Mid-East, it could weigh on oil prices.
What would change our view:
The US re-escalating strikes on Iran and vice versa
TODAY’S WATCHLIST
01 EU Consumer confidence figure
02 FED Barkin’s speech
03 FED Williams speech
04 ECB Nagel’s speech
Disclaimer:
This information is not considered as investment advice or investment recommendation but instead a marketing communication.
