MARKETS CONSOLIDATING DESPITE HISTORIC OPEC DEAL

Market sentiment still look to be in something of a consolidation mode today amidst a mix of factors including oil China and concern over the Italian referendum is leaving traders in a state of caution. On the positive side, OPEC members agreed to an historic production cut which will lead to the cartel reducing supply from the current around the 33.8 million barrels per day to 32.5m barrels per day. Furthermore, Russia (not a member of OPEC) has agreed to cutting its own production by 300,000 barrels per day. The price of oil has soared on the news and is up around 10% since the rumours of a deal started circulating yesterday. Another positive for sentiment is the China Manufacturing PMI  which beat estimates on both the official and unofficial Caixin data, remaining above 50 and at the highest level on the official data (51.7) since July 2014. However there is increasing concern over the capitalisation of Italian banks ahead of the Italian referendum on Sunday. If the referendum returns a “no” vote to Prime Minister Renzi’s proposed constitutional reforms then the prospect of economic reform becomes much harder, something that the banks badly need to drive growth again.