The domino effect
This weekend is the December 15th tariff deadline, so the market sits tight, waiting to clear this hurdle before a more extensive trade domino effect ensues.
Stocks
Asia markets were veering beta neutral with a pinch of defensive allocations as investors reduce risk and continue to protect their gains for the year. Even moreso today, where the market struggles with a China trade data hangover.
Uneven recovery
We can't seem to string these nascent positive economic strands together. When U.S. data beats, China sags and vice versa. The issue with this type of uneven economic recovery is it gives rise to the notion that robust data starts to look like a head fake, and the big surprises will come from the dark side.
Yuan
USD/CNH consolidated around the lows on very low turnover. I think with the weak China trade data over the weekend and uncertainties into the December 15th U.S. tariff deadline. It's too early to be complacent as there could be lots of risk in the making.
Gold
Despite the elevated risk for the coming weekend's U.S. tariffs, very little haven demand today. But gold has been finding a small bid on the geopolitical escalations in Ukraine. However, the leaders of Germany, France, Ukraine, and Russia will meet in Paris this week to begin talks aimed at resolving the conflict in Ukraine. While little chance of any substantive agreement, but there are hopes at least of renewed diplomatic engagement.
OPEC: Compliance remains the huge question.
A big issue within OPEC to date has been non-compliance from individual members, particularly second-biggest producer Iraq. Saudi Araba strong-armed the importance of this and demanded this metric improve Both Iraq and Nigeria stated that their November production was compliant, but this remains to be seen in the data. OPEC+ will hold a formal meeting on March 6th to assess whether the cut should be extended into 2Q, which gives the group time to access trade war risk and to view if the current production cuts are working or not
I'm a bit surprised by all the bullish inference as OPEC's prime strategy of the past year has been limiting downside risk in the face of weakening demand and still-strong US supply growth. So, in line with that strategy, OPEC has kept the so-called OPEC straddle in check which should cushion downside risks but not necessarily push oil prices higher.
Oil prices could remain firm until after the ARAMCO IPO, then watch out down below, even more so if there are no indications of a December 15th tariff deferral.