Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 7, 2018. REUTERS/Brendan McDermid
A trader works on the floor of the New York Stock Exchange. The decisions being made this month in Vienna, London and Washington will all affect the markets. Photo: Reuters

The three key decisions shaping the markets this month



One key decision down and two more to go before the end of the year. The Opec agreement to cut oil production over the weekend marks the first of three important policy decisions being made this month. The other two will be about Brexit in the coming week in the British Parliament and about US interest rates in the following week by the US Federal Reserve.

The Opec deal was clearly more than the markets were expecting, with crude oil prices rallying 5 per cent on the news. Opec and its partners, most critically Russia, will cut production by 1.2 million barrels per day for six months, with Opec countries taking 0.8 million bpd of the cuts.

The agreement effectively unwinds the increase in production that Opec instituted at its last meeting in May. Since then production has increased steadily from producers that had the capacity to do so: Saudi Arabia, the UAE, Iraq and Russia. The latest deal sees Opec trying to manage the optics of the oil market carefully: cutting from October 2018 production levels means that several countries will be cutting from near record high output and avoid drastic damage to domestic economies.

A cut of 1.2 million bpd will help to alleviate some of the stock build anticipated for 2019 and in the near term will help keep prices from extending their 30 per cent decline from October peak levels. But with a market surplus of 1.5 million bpd forecast for the first quarter of 2019 the cuts won’t be enough to completely offset the build in inventories. Opec members such as Saudi Arabia will also be counting on supply disruptions from countries like Venezuela, Iran and now Canada to persist in order for these latest cuts to have an impact.

____________

Read more:

Sterling's roller-coaster ride not over yet as Brexit mayhem continues

The issues behind the latest market sell-off are unlikely to disappear

Oil price could remain high for some time

Are we ready to handle the next financial crisis?

___________

In the coming week the highlight of course will be the UK Parliament’s vote on Theresa’s May’s Brexit agreement with the EU on Tuesday. The chances of it being passed on the first attempt are very low, so it will be the scale of the defeat that will matter to markets.

A narrow loss might allow Mrs May to save some face to fight again, and perhaps to negotiate a few amendments to get it passed on a second vote. However, a heavy loss could bring down her leadership and make the Brexit process appear in chaos, which in the first instance would likely see the pound lose further value. Whether these losses are sustained, however, will depend on what happens next.

Most likely it will be Parliament itself that will take the initiative away from the UK government to manage the Brexit process, and this could result in a number of outcomes, not all of which are negative for sterling. In particular, it is possible that another deal is constructed, and/or that there could still be a second referendum. It may also happen that the deadline for Brexit is extended from March 31 to allow a new deal to be crafted. Any of these outcomes means that the upcoming week’s decision will not be the end of the issue, far from it, and that Brexit will continue as a focus of uncertainty well into 2019.

The third important policy decision to be made before the end of the year will be the Fed’s on December 19. US jobs data on Friday, while showing a slowdown in jobs growth in November, also showed that wage pressures are continuing to build. This should make a decision by the Fed to raise interest rates in less than a fortnight relatively straightforward. But again it will be what comes after that will determine how the markets respond.

Investors have already revised down sharply their expectations for monetary tightening in the US over the past month, amid a weakening of inflation expectations and worries about global growth. As such it will be the messages from Jerome Powell about the future path of rates that will be crucial for the markets, and following that it will be all down to the data.

None of the decisions being made this month in Vienna, London and Washington will bring finality to the issues that they address, but they are all important in shaping the way the markets will perceive them as they approach the coming year.

Tim Fox is the chief economist and head of research at Emirates NBD

COMPANY PROFILE

Company name: Almouneer
Started: 2017
Founders: Dr Noha Khater and Rania Kadry
Based: Egypt
Number of staff: 120
Investment: Bootstrapped, with support from Insead and Egyptian government, seed round of
$3.6 million led by Global Ventures

ROUTE TO TITLE

Round 1: Beat Leolia Jeanjean 6-1, 6-2
Round 2: Beat Naomi Osaka 7-6, 1-6, 7-5
Round 3: Beat Marie Bouzkova 6-4, 6-2
Round 4: Beat Anastasia Potapova 6-0, 6-0
Quarter-final: Beat Marketa Vondrousova 6-0, 6-2
Semi-final: Beat Coco Gauff 6-2, 6-4
Final: Beat Jasmine Paolini 6-2, 6-2

The Bio

Favourite place in UAE: Al Rams pearling village

What one book should everyone read: Any book written before electricity was invented. When a writer willingly worked under candlelight, you know he/she had a real passion for their craft

Your favourite type of pearl: All of them. No pearl looks the same and each carries its own unique characteristics, like humans

Best time to swim in the sea: When there is enough light to see beneath the surface

EMIRATES'S REVISED A350 DEPLOYMENT SCHEDULE

Edinburgh: November 4 (unchanged)

Bahrain: November 15 (from September 15); second daily service from January 1

Kuwait: November 15 (from September 16)

Mumbai: January 1 (from October 27)

Ahmedabad: January 1 (from October 27)

Colombo: January 2 (from January 1)

Muscat: March 1 (from December 1)

Lyon: March 1 (from December 1)

Bologna: March 1 (from December 1)

Source: Emirates

KEY DATES IN AMAZON'S HISTORY

July 5, 1994: Jeff Bezos founds Cadabra Inc, which would later be renamed to Amazon.com, because his lawyer misheard the name as 'cadaver'. In its earliest days, the bookstore operated out of a rented garage in Bellevue, Washington

July 16, 1995: Amazon formally opens as an online bookseller. Fluid Concepts and Creative Analogies: Computer Models of the Fundamental Mechanisms of Thought becomes the first item sold on Amazon

1997: Amazon goes public at $18 a share, which has grown about 1,000 per cent at present. Its highest closing price was $197.85 on June 27, 2024

1998: Amazon acquires IMDb, its first major acquisition. It also starts selling CDs and DVDs

2000: Amazon Marketplace opens, allowing people to sell items on the website

2002: Amazon forms what would become Amazon Web Services, opening the Amazon.com platform to all developers. The cloud unit would follow in 2006

2003: Amazon turns in an annual profit of $75 million, the first time it ended a year in the black

2005: Amazon Prime is introduced, its first-ever subscription service that offered US customers free two-day shipping for $79 a year

2006: Amazon Unbox is unveiled, the company's video service that would later morph into Amazon Instant Video and, ultimately, Amazon Video

2007: Amazon's first hardware product, the Kindle e-reader, is introduced; the Fire TV and Fire Phone would come in 2014. Grocery service Amazon Fresh is also started

2009: Amazon introduces Amazon Basics, its in-house label for a variety of products

2010: The foundations for Amazon Studios were laid. Its first original streaming content debuted in 2013

2011: The Amazon Appstore for Google's Android is launched. It is still unavailable on Apple's iOS

2014: The Amazon Echo is launched, a speaker that acts as a personal digital assistant powered by Alexa

2017: Amazon acquires Whole Foods for $13.7 billion, its biggest acquisition

2018: Amazon's market cap briefly crosses the $1 trillion mark, making it, at the time, only the third company to achieve that milestone

Our legal columnist

Name: Yousef Al Bahar

Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994

Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers

So what is Spicy Chickenjoy?

Just as McDonald’s has the Big Mac, Jollibee has Spicy Chickenjoy – a piece of fried chicken that’s crispy and spicy on the outside and comes with a side of spaghetti, all covered in tomato sauce and topped with sausage slices and ground beef. It sounds like a recipe that a child would come up with, but perhaps that’s the point – a flavourbomb combination of cheap comfort foods. Chickenjoy is Jollibee’s best-selling product in every country in which it has a presence.
 

Profile

Company name: Jaib

Started: January 2018

Co-founders: Fouad Jeryes and Sinan Taifour

Based: Jordan

Sector: FinTech

Total transactions: over $800,000 since January, 2018

Investors in Jaib's mother company Alpha Apps: Aramex and 500 Startups


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