ECB and OPEC Meetings in Focus Today
European equity markets are expected to open slightly lower again on Thursday, as risk aversion continues ahead of today’s ECB press conference. Traders may also have one eye on today’s OPEC meeting, with reports yesterday suggesting that the group may consider a new output ceiling, although I remain sceptical.
The ECB is very unlikely to announce any new stimulus measures at today’s meeting despite data earlier this week confirming that the euro area remains in deflation. It is likely to argue that the large stimulus package announced in March needs time to find its way through to the economy but warn that it will consider all options if extremely low levels of inflation persist.
As is often the case, it’s the press conference that people are really interested in. How great is the appetite for more stimulus from the ECB, what forms is it likely to come in and how long could we have to wait for it. Mario Draghi will probably stress that the central bank expects inflation to rise very gradually but at what point does these glacial moves, or worse declines, warrant further action.
Today’s OPEC meeting in Vienna got a lot more interesting yesterday following reports that the group will consider setting a new output ceiling. OPEC has been producing around 32.5 million barrels per day recently, well above the 30 million barrel ceiling that had previously been in place.
I highly doubt any ceiling would require a cut in current production levels, given the reluctance to do reduce output until now. Even a freeze would be very surprising given that its plan to let the markets balance themselves by pricing out higher cost players is finally baring some fruit. Any freeze at this stage which may lift prices even further would only ease the pressure on those higher cost producers that are currently feeling the strain. If a new ceiling is agreed, I would expect it to be above current levels which would give OPEC room to increase output some more if it wishes, but even this may be tough to agree for the group.
We’ve also got plenty of data to come today, with the UK construction PMI being released early in the session, while the ADP non-farm employment change, US jobless claims and EIA crude oil inventories are due this afternoon. On top of this, we’ll hear from three Fed officials today, with Jerome Powell, William Dudley and Robert Kaplan all due to speak.