Weekly Market Outlook

U.K. bonds extend gains after the Bank of England fails to fill its purchase target, oil falls on Saudi record production, and Trump is in trouble again. Here are some of the things people in markets are talking about today.

Gilts rally

U.K. debt is rallying this morning with yields on 3-, 5-, 10- and 30-year bonds falling to record lows. Yesterday, the second day of purchases under the Bank of England’s expanded QE program, saw the bank fail to purchase the targeted amount of longer-dated bonds as it could not find enough sellers. The bank this morning said that it would add the purchase shortfall to a later operation. The pound also rallied this morning, and was trading at $1.3055 at 5:44 a.m. ET.

Oil falls

A barrel of West Texas Intermediate for September delivery fell to $42.28 by 5:37 a.m. ET, with a Brent dropping to $44.56, extending yesterday’s declines. Data from the American Petroleum Institute on Tuesday showed inventories rose, with the agency also downgrading its price forecast for the rest of the year. Adding to the downward pressure is news that Saudi Arabia has told OPEC that it pumped a record 10.67 million barrels of oil a day in July, according to two people with knowledge of the data.

The Dollar doesn’t believe in a Fed hike

The dollar fully erased the rally sparked by last week’s bumper payrolls number, with the Bloomberg Dollar Spot Index trading 0.4 percent below last Friday’s open this morning. Market-based expectations of another rate hike this year are at 45 percent. While the short-term movement in the dollar is lower, the longer view remains that the greenback is in an up-trend, with implications there for the price of gold over the medium term.

Markets slip

Global stocks markets are slipping a little this morning as the August lull continues. Overnight in Asia, the MSCI Asia Pacific Index added 0.2 percent, with Japan’s Topix index dropping 0.2 percent in light trading. In Europe, the Stoxx 600 Index was 0.3 percent lower at 6:06 a.m. ET, with volumes traded about a third below the 30-day average. Germany’s DAX Index, which entered a bull market yesterday, was down 0.5 percent. S&P 500 futures added 0.1 percent.

Trump in trouble (again)

Republican presidential nominee Donald Trump finds himself embroiled in a new controversy this morning after he suggested that “the Second Amendment people” could stop Hillary Clinton from abolishing the right to bear arms. Clinton’s campaign condemned Trump’s comments. Trump’s troubles extend beyond his controversial utterances, as a Bloomberg national poll released this morning show he is 6 points behind the Democratic nominee in a two-way race.

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Weekly Market Outlook

Saudi Arabia and Iran are showing no let up in their market share war, just days after OPEC announced an informal meeting to discuss ways to stabilize falling prices.

The Organization of Petroleum Exporting Countries announced on Monday it will hold informal talks on the sidelines of a conference in the Algerian capital next month. Saudi Arabia, the world’s largest crude exporter, told OPEC that it boosted oil output to a record 10.67 million barrels a day in July, two people with knowledge of the data said. Iran’s output is up to 3.85 million barrels a day, Fars news agency reported, citing Oil Minister Bijan Namdar Zanganeh. That’s the highest since 2008, data compiled by Bloomberg show.

“It only gives one signal to the markets that the Saudis are not here to scale back, especially in the face of Iranians bringing more oil to the market,” Abhishek Deshpande, an analyst at Natixis SA in London, said in a Bloomberg television interview. “I doubt there’s going to be any concrete agreement despite there being talks.”

Saudi Arabia typically pumps more oil in the summer to meet higher domestic energy demand from air conditioning. The kingdom is also engaged in a battle for market share with rival Iran and has cut prices to its customers in Asia, the biggest market for both exporters. Kuwait on Wednesday also cut its pricing to Asia, widening the discount to $2.65 a barrel for September from $1.70 a barrel in August.

OPEC’s smaller producers, which have driven calls to cap the group’s output, can only look on as prices tumbled more than 50 percent since mid 2014. The last effort to freeze output in April, which also included non-OPEC producer Russia, collapsed after Saudi Arabia demanded that Iran be part of the deal. Iran still opposes any limits on its production, with the country seeking to reclaim its pre-sanctions share of OPEC’s total output before contributing to any production freeze, according to an OPEC delegate who asked not to be identified.

OPEC nations aren’t pushing to revive the aborted April proposal, two delegates from the group said last week, and analysts don’t expect any deal to be reached.

“These planned OPEC discussions may be viewed by some as a cheap possibility to try and stabilize the market,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “It’s more likely to be a way of further destroying the market’s confidence in OPEC, as the organization cries wolf once again.”

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