Daily Market Color

Oil Pushes Higher Following OPEC Deal as Bonds Resume Selloff

Oil Continues to Rally  Building off yesterday’s oil production deal news which prompted record trading volumes, crude oil prices surged an additional 4% today, bringing the price of Brent crude to its highest mark in more than 16 months at over $54 per barrel.  Several economists have projected crude to trade close to $60 by the end of 2017, while others remain skeptical that the agreed upon output level will have the intended impact, given the potential for additional producers to enter the market at higher prices, most notably in the United States.

On the opposite end the commodity spectrum, gold slipped to its lowest levels in nearly 10 months as it fell an additional 0.4% to $1,169 an ounce.  Today’s drop adds to a subpar November that saw the metal post its largest monthly decline since 2013.  In addition, exchange-traded funds that are backed by gold have seen their assets fall for the 14th consecutive day, as the business-friendly outlook for the economy under Donald Trump has investors reassessing their allocations to the reserve commodity.

Bond Rout Resumes Despite Labor Data Miss 
The trend that saw global bonds post a $1.7 trillion loss throughout November continued on the first day of December, as US Treasurys sold off again, with yields/swap rates increasing 2-10 bps across the curve once again in a bear steepening pattern.  The 10-year yield touched its highest mark since July 2015 at 2.45%, up 6 bps on the day, adding to the 56 basis point rise in November.  While the December FOMC meeting carries a greater than 95% probability of a rate hike, investors will be combing through tomorrow’s payroll data to get a further indication as to the health of the economy and in turn, the potential pace of future increases.

Economic data released today included weekly initial jobless claims, which increased 17,000 for the week ended November 26th on the way to a seasonally adjusted 268,000.  The figure is the highest level since June, coming in significantly above median forecasts of 253,000, but remaining below the benchmark 300,000 threshold.  Other data on the day included November’s Institute for Supply Management (ISM) index which reflected a five-month high in factory activity, resulting from a pickup in new orders and production.  The ISM index added 1.3% for the month to a total reading of 53.2.

The three major U.S. stock indices traded mixed again for the day as investors continues to rotate money out of tech stocks and into sectors seen as more direct beneficiaries of future Trump policy, most noticeably financials.  The DJIA finished up about 0.25% on the day, while the S&P 500 shed 0.4% and the Nasdaq tumbled 1.5%.      

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