To my mind, after a seemingly endless succession of sessions in July and August without a one per cent move either up or down for the S&P, we are now being driven by two issues. First, the US Federal Reserve and its painfully slow rate-hiking path, and second by that old perennial – the oil price.
On the former, the merest whiff of a positive piece of data and the market goes into a stroppy adolescent depression. Last week, however, it whooped with joy when the raft of underwhelming numbers more or less shut the door on any prospects of a hike. If we don’t get a hike, it’s going to be the same old story right up until the December Federal Open Market Committee meeting and beyond.
On the latter, you’ve got to love the way the big boys of oil cartel Opec are still proving a class act when it comes to moving the market. Like some latter day Ratpack act, you don’t need fresh material to keep the audience racing for the dance floor.
In fact, Opec and its on-off pal Russia haven’t had any new material for years. When it comes to stated production levels, they look distinctly like a one-hit wonder.
That said, the first song was a real cracker, and noone seems to mind all these years later that they keep wheeling out the same old tune. Every time it’s played, it seems like the first time, and the punters of the streaming generation lap it up just as much as those who bought the 45’ on vinyl years earlier.
And what is that hit tune? Why, it’s the one where the band pledges to be honest and keep to its promises regardless of its past indiscretions. The one where, no matter how many times they cheated in the past, they promise to stick to the rules to keep the relationship on the straight and narrow.
The amazing thing is, of course, that it works every time. The oil majors keep promising some form of discipline where no-one will overproduce. This is, and always has been, ludicrous, despite Saudi Arabia’s old role in the band of being the swing producer. Outside of the Cuf Cooperation Council, all oil producers have always produced every barrel they can, and will always do so.
Other bands such as the European Central Bank (ECB) and the Bank of Japan (BoJ) also had their time at the top of the Hit Parade, but their tune hasn’t proved to have as much appeal as the years have rolled by. The verbal intervention that has enjoyed such eternal popularity among oil market junkies just doesn’t seem to have the same appreciation in central bank world.
Tunes by the ECB’s Mario Draghi and Haruhiko Kuroda of the BoJ, once melodic and soothing, aren’t making the same splash on the airwaves. Currencies are just not reacting the way they are supposed to and there is a new fear from the groups’ managers and roadies that their heydays are past and they’re consigned to being played in elevators. Meanwhile, the oil guys are still the top downloads on Spotify and Deezer.
Sooner or later, even Opec will need some new material. But for now, the central bankers can only look on in envy at the longevity of their one great hits.