By: Wolfgang Jäggi
Is three times the charm this time, too? If the ministers of oil exporting countries reach an agreement today, today the most important item the financial markets are looking forward to, the S&P 500 could close this (short) week higher than it started. That would then be the third week in a row that this happens. Yesterday, the American markets turned in the plus after it was announced that the Americans will not get a socialist president. Bernie Sanders, presidential candidate for the Democrats, announced in a video message to end his election campaign. He will remain eligible, but that is of course only for the stage. In addition to the fact that he has now managed to get too few voters behind him to win, Sanders is also very busy as a senator on behalf of Vermont to negotiate the economic support packages in Congress. So the November presidential election will be between the Democratic candidate Biden and the Republican Trump. Both are doing well with capitalist America and we saw that yesterday on their financial markets. These markets closed 3% higher on average. What also helped was a tweet from President Trump in which he hinted that he wants to ease the corona measures quickly. In Europe, the positive sentiment continued; on our continent, stock markets opened higher this morning.
As said, OPEC can still throw a spanner in the works for a further recovery of the financial markets. It is meeting today (virtually) to discuss whether they can agree to reduce oil production and, if so, by how much. There is broad support in the market that an agreement will (have to) be reached, so if they (virtually) quarrel, the financial markets will react disappointed. Behind the scenes, of course, negotiations are already going on. OPEC member Algeria confirmed that there is talk of a substantial reduction in production by the oil cartel and other oil producers. The hope of a way out of the conflict between Saudi Arabia and Russia already led to a sharp rebound in oil prices on Wednesday. Both OPEC and Russia believe that the United States should also limit production. But of course that is not going to happen. First of all, not because American oil producers are all independent companies that determine their own policy. This is in contrast to OPEC and Russia where oil production is determined by the state. Secondly, it is also not right to ask this of the United States. After all, oil prices are pushed down by oil exporting countries that dump their surpluses on the world market. The United States is mainly self-sufficient and therefore mainly an oil producer and not an oil exporter. Later today we will see if there is (virtual) white smoke coming from Vienna. Should be; after all, it’s Maundy Thursday.