European markets are shaking off some of the recently escalated geopolitical situation as traders continue to focus more on the economic fundamentals rather than on the political aspects. These tensions without any doubt have put the foundation for the oil market, which is trading solidly towards the upside.
However, the strains between Turkey and Russia after the recent events do remain very real and this will have both political and economic consequences. It is very sad that this situation has befallen and the unity which was formed against a common enemy is looking increasingly shaky. If you want to defeat your enemy you have to understand the root cause of the problem and then address those problems. But, above all, united front is the most imperative element there. Turkey is one of the most stable country among its neighbors and economically sound relative to them as well and any further tensions between Russian and Turkish relationship will be nothing but a bad news.
The second most momentous element which drives the price of oil after the law of supply and demand, is geopolitical tensions and these remain under the trader’s focal point. We had the best day for the oil market yesterday after some long time. The sentiment in the equity market overall remains very shaky and all eyes are on these political tensions. This is certainly not a good news if you are hoping for a Stana rally, which should be kicking off very soon, but under the given incidents, it appears there may not be any Santa rally at all. Not to mention, the ambiguity we have around the US Federal reserve rate hike agenda.
It seems highly likely that the Fed will surge the interest rate coming next month and the Fed policy committee member, Mr. Dudley has increased the volume on this tape over the weekend which caused the sell off in the commodity market.
As for the economic data, we do have a number of firecrackers for today, which could bring an enormous amount of uncertainty. To kick start this, we have the UK Autumn statement and comprehensive spending review from Mr George Osborne- the UK’s chancellor. After the recent escalation in geopolitical tensions, it is highly likely that Mr chancellor will give another thought about any kind of cuts for the UK’s home office and defense budget. This could impact the defense sector and companies which may have a very minute stake, could also experience a surge in their trading volume and stock price.
As for the US, we have the core durable good order m/m and also the unemployment claims data. It is a short trading week for the US given the thanks given public holiday. Therefore, traders will see this data very carefully and try to figure out if the situation has picked up yet. The forecast of the core durable order is for 0.5%. The previous reading slipped in a negative territory with the reading of -0.3%. The forecast for unemployment claims are 273K and 271k.