By Geoffrey Smith
Investing.com — OPEC and its allies decide to cut their oil output by 2 million barrels a day, in a snub to U.S. President Joe Biden and Europe. The stream of U.S. labor market data continues with weekly jobless claims, while more hawkish talk from the Federal Reserve steadies the dollar after a sharp correction. The European Central Bank publishes the accounts of its last meeting, and Germany’s economy continues to slow down. Meanwhile, Elon Musk’s deposition is postponed, and Twitter stock edges down further away from the agreed takeover price. Here’s what you need to know in financial markets on Thursday, 6th October.
1. OPEC+ snubs Biden, Europe with big output cut to protect Russia
The Organization of Petroleum Exporting Countries closed ranks with Russia to support oil prices, ordering a of 2 million barrels a day from November despite loud and heavy pressure from the U.S.
The move is a reaction to signs of weakening demand from a slowing world economy but is also a clear sign to the U.S. and Europe that the world’s biggest oil producers have no interest in punishing Russia for its invasion of Ukraine and the annexation of its territory.
The actual reduction in output is likely to be nearer to 1 million barrels a day, according to analysts, given that most of OPEC (and Russia) are already producing below their quotas. As such, the move has the effect of sparing Russia from any loss of market share as western sanctions start to crimp its production.
The move comes as gasoline prices are on the rise again in the U.S., only a month before mid-term elections. U.S. of and also fell surprisingly last week.
2. Musk’s deposition postponed, but Twitter arbitrage widens
Elon Musk’s scheduled deposition at the request of Twitter’s lawyers has been postponed, after the Tesla (NASDAQ:) CEO agreed to go ahead with the acquisition of the social media company at his initial offer price of $54.20 a share.
However, the judge overseeing the trial sought by Twitter noted that neither side had sought to end the litigation, suggesting that Twitter’s board is continuing to hold Musk’s feet to the fire until it actually sees his money.
Various reports suggest that some investors, such as Apollo Global Management (NYSE:), who had been willing earlier to contribute to the buyout fund have now pulled out, a reflection of the sharp deterioration in the market outlook since April when Musk first made his move.
Separately, Musk appeared to be fostering the impression that he should not be allowed to own Twitter, by doubling down on his thesis that Ukraine should bow to Russia’s demands for territory in return for peace.
3. Stocks set to open lower; oil and gas in focus
U.S. stock markets are set to open lower again after an attempted rally quickly ran out of steam on Wednesday, casting fresh doubt over the market’s underlying strength.
By 06:20 ET (10:20 GMT), were down 210 points or 0.7%, while were down 0.8%, and were down 0.9%, with Tesla stock – down 1.1% in premarket at a three-month low – weighing on the latter two.
All three cash indices had ended around 0.2% lower on Wednesday after and the Institute for Supply Management’s both indicated plenty of momentum still in the economy.
Stocks likely to be in focus later include the oil and gas sector, which will balance the positive implications from the OPEC+ move against a disappointing update overnight from Shell (LON:), which fell in Europe after warning that its third quarter results wouldn’t match the exceptional second quarter results.
Constellation Brands (NYSE:), Tilray (NASDAQ:), McCormick (NYSE:), and ConAgra (NYSE:) are all due to report earnings before the open.
4. Jobless claims seen staying close to six-month low; Fed’s Cook, Evans to speak
The week’s series of labor market data continues with the release of weekly at 08:30 ET, which are expected to have ticked up modestly from last week’s six-month low of 193,000.
The monthly survey for September will also be released at 07:30 ET and is likely to extend a sequence of year-on-year gains in layoffs.
Whether either number will have a material impact on the Federal Reserve is unclear. Both Atlanta Fed President and his San Francisco colleague repeated again that more rate hikes will be needed to tame , with Bostic in particular warning explicitly against betting on an early ‘pivot’ from the central bank.
The steadied after some sharp losses over the last couple of days.
Chicago’s and Fed Governor are also both due to speak later.
5. ECB accounts due as German orders point to deeper Eurozone problems
The European Central Bank will publish the of its last policy meeting, which should cast more light on how much enthusiasm there is in Frankfurt for more big rate hikes as the slowdown in the Eurozone economy becomes increasingly serious.
Eurosystem central banks are now openly warning of a recession, despite the ECB preferring not to acknowledge that risk in its latest forecasts in September.
for August, a forward-looking indicator for the Eurozone’s biggest economy, did little to improve the outlook, registering their . There was a crumb of comfort from a big upward revision to July’s numbers, however, as supply chain bottlenecks eased.