A month of markets in two minutes: OPEC steals the limelight as Trump lifts US equities

Oil markets took centre stage at the close of last month, even eclipsing the dramatic result of the US election at the start of November, after OPEC’s meeting sparked a sharp rally for the price of crude.
In a month which had already delivered a shock in the form of Donald Trump’s election victory, OPEC’s decision to cut oil production for the first time in eight years sent crude prices surging (they have subsequently hit 18-month highs in early December).
By the close of November, Brent crude had rallied from a low of $44 a barrel to close at $50.45.
Sam Wahab, director of oil and gas research at Cantor Fitzgerald Europe, said OPEC’s decision could not be underestimated, with the cartel changing the landscape for oil over the coming years.
“Prior to this agreement, the environment of sub $50 oil was likely to persist, but this move sufficiently addresses the supply/demand dynamics, with some 3.5% of supply being cut from January,” he said.
“It means 2017 will likely see prices around the $55-$60 a barrel mark, and we may yet see further jumps in prices this week if the non-OPEC members also agree a production cut at their meeting.”
Away from oil, US markets climbed in the wake of Trump’s victory, the S&P 500 climbing 3.5% to close at 2,198 points. Valuations firmed as investors anticipated a series of pro-business measures from Trump over the coming years.
They have subsequently hit record highs in early December, and there could be more to come according to Peter Lowman, chief investment officer at Investment Quorum.
“Corporate America could be the place to look at now, especially if Trump’s plan to cut corporation tax is carried out,” Lowman said.
“Although valuations are already at records in the US, areas like infrastructure could benefit from the incoming President’s policies and the general shift to spend more money to get the economy going.”
Other markets were mixed. Japanese equities charged higher, with the Nikkei up nearly 5% on the month at 18,308 points, but UK markets retreated as fears over the manner in which the country will extricate itself from Europe emerged.
The FTSE 100 closed down 2.5% on the month at 6,783 points, while the FTSE All-Share followed suit, off 2% at the end of the month at 3,692 points. Core European markets were mixed, with the German DAX dipping marginally to close at 10,640 points, while the French CAC gained 1.5% to finish at 4,578 points.
While the UK under performed peers, Lowman said it was a better option than other EU nations at current valuations, with political risks set to continue unabated on the continent.
“Europe is a busted-flush. Although valuations are in your favour, there is too much political uncertainty,” he said.
“However, the UK tends to piggyback off the US more closely so it looks like the best of a bad bunch.”
Away from equities, parts of the fixed income markets had another month to forget, with yields on developed market government bonds continuing their upwards trajectory amid expectations of rate rises to come. Yields on 10-year UK gilts have moved up to 1.44%, while US treasuries have accelerated through the 2% mark, climbing to 2.38%.
Safe havens may yet come back into fashion, but for now a strong dollar is holding back gold, which tumbled from $1,280 to $1,172.