Stocks Touch New Record Highs Amid Political Tensions

Oil Surges on Saudi Supply Curbs – Crude oil futures advanced more than 2% on the day following Monday’s rhetoric from OPEC Secretary-General Mohammad Barkindo confirming supply cuts in Saudi Arabia.  Barkindo announced that the world’s largest oil exporter would be reducing the number of barrels pumped next month to its lowest levels since 2015.  Detailed in the comments, Saudi Aramco, the state-run oil company, will be supplying buyers with less than requested during the month of November, with the hopes that other oil producing nations will follow in its steps.  The action bodes well for the chances of an extension or potential deepening of the existing supply cuts amongst OPEC members and has pushed WTI crude to its current level of $51/barrel, up $1.40 for the session.

Another Day Another Record High

All three major US stock indices gained 0.1%-0.3% on the day, hitting new record highs that were led by gains in consumer and energy shares.  Treasury prices also rose during the trading session as heightened tensions between the US and Turkey and political turmoil in the White House led to demand for the haven asset.  Yields/swap rates are down 1-3 bps across the curve, with the 10-year note yield edging lower to 2.35%.  The US dollar weakened 0.3% against major currencies and was down as much as 1.1% against the Turkish lira before recovering some of the losses.              

On the regulatory front, the Treasury Department recently weighed in on two impactful topics in the banking space.  After careful consideration, it was determined that a merger between the CFTC and SEC would be prohibitively expensive. This proposal was being considered in order to reduce the regulatory overlap and burden that market participants face from the two agencies. However, according to Treasury Secretary Steve Mnuchin, the costs outweigh the potential benefits.  Nevertheless, the Treasury did raise some optimism by suggesting that margin requirements for non-cleared swaps be reduced and also noted that the definition of financial entity was too expansive. They recommended that the CFTC revisit the definition of a financial entity and expand the exemptions.

Independence of Catalonia Delayed

Catalan President Carles Puigdemont backed off his previous demand for Catalan’s immediate independence from Spain in an address to the regional parliament earlier today, electing instead to seek talks with the Spanish government over the next couple weeks.  In the speech, Puigdemont acknowledged his mandate to pursue independence following the referendum vote on October 1^st despite previous rejections of such assertions from both the EU and the Spanish government.  Ahead of today’s announcement, Spanish police had been stationed in Catalonia ready to arrest Puigdemont “immediately” if he formally declared Catalan independence.  Tensions in the region are expected to remain escalated until the situation is fully resolved, with European financial markets fluctuating widely as more updates come in.