Investors are getting ready for some big changes this week. The Organization of the Petroleum Exporting Countries (OPEC) is scheduled to have a very important meeting on July 6th. At this meeting, OPEC will likely discuss and vote on increasing oil production, a move that could raise or lower oil prices around the globe. International oil prices are retrenching after surging earlier in the week on fears stoked by the Middle East flare-up. At the same time, an increased global risk appetite is rapidly changing global financial markets.
Besides OPEC’s upcoming meeting, there are a number of economic indicators that are worth watching. A look ahead at the upcoming US jobs report. This report will provide essential directional clarity to the labor market and definitely move investor sentiment. At the same time, European inflation figures are being watched like hawks, as they could decisively shift monetary policy across the continent. Those economic reports will be weighted heavily in determining how the markets react to them. Look for their impact to increase as we get closer to the holiday weekend.
Another major area of concern among investors is the expected approval of Trump’s tax bill, prior to the July 4th break. If passed, this legislation would be a tremendous victory for sustainable economic development and market integrity throughout the United States. The tax bill is one of the pieces we’re tracking most closely, as it rapidly shifts with other economic developments and concerns among investors.
Against all of these backdrops though, the new PMI (Purchasing Managers’ Index) prints are getting all the headlines. The PMI data provides valuable insights into manufacturing and service sector performance, which are critical for understanding overall economic health. Additional positive PMI results might be just what the markets need to drive even more confidence.
Global markets are beginning to respond to these developments, with oil prices beginning to drop. This drop realigns with a larger macro trend of reduced demand for safe-haven assets, including gold. Investor sentiment is changing too. This shift comes at a time of fear over the US dollar’s supremacy, but the dollar is currently under duress from mounting debt concerns. At the same time, the Swiss franc remains a safe haven drawing considerable demand, underscoring a powerful flight to safety even as global market forces rapidly change.
Helping to brighten the spirits of investors has been an easing of tensions in the Middle East. Better news on trade negotiations has helped encourage greater risk-taking behavior throughout global financial markets. In this positive environment for risky assets, major currencies are witnessing a strong risk-on appetite, and gold and oil prices are both on the decline.
As OPEC approaches its July 6 meeting, market analysts suggest that the potential announcement regarding oil production could give bears an advantage going into the weekend. This change, combined with other economic signals and global developments on the geopolitical front will set the stage for impact on market trends, investor sentiment and strategies to come.