This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Global markets are continuing the rally as we move closer to year end, with the FTSE 100 testing the 6300 level. Time is fast running out for the top UK benchmark to close out the month in the green, yet with the European Central Bank having fuelled a 6% weekly loss earlier this month, it is miraculous that the possibility remains relatively likely. Interestingly, today's FTSE rally comes despite a raft of austerity measures in Saudi Arabia which hints at preparation for further crude oil weakness in 2016.
Today’s decision from Saudi Arabia to implement its own form of austerity speaks a thousand words regarding its willingness to maintain the depressed crude oil prices through 2016. With some speculating that these latest measures imply a $45 crude price through 2016, there is little reason to believe oil prices – and thus commodity stocks – are going to rebound anytime soon.
Given the $98 billion deficit in Saudi Arabia this year, today’s measures are unlikely to be the last. A possible fire sale in the foreign assets held by sovereign wealth funds poses a real threat to Western cross-asset demand. Alternately, the Saudi’s could be the latest in a growing list of countries who remove their peg to the US dollar, which would have significant implications in terms of stability and confidence in a nation that is used to having its own way.
US consumer confidence rebounded in December, regaining much of the ground lost in November, which had initially been thought to have been the worst reading in 2015. However, the positive revision to the November number, alongside the strong December reading, portrays a stable 2015 for consumers which will no doubt provide plenty of positives for the Fed hawks out there.