Market Prognosis

A concise summary of the major macro events of the past 24 hours, and selected UK company-specific news.

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November 8, 2023

Why are oil prices so weak?

Macro & Overnight

The most notable feature of the macro backdrop has been the sustained recent weakness in oil prices. Brent crude has fallen nearly 12% in the last month.

There are several possible explanations for this price action. It might be due to production cut cheating within OPEC+, a demand collapse indicative of a deflationary recession among oil-consuming economies, or a view that the Middle Eastern war premium is no longer required. Market participants now believe Iran won’t become engaged in a direct hot war.

All of the above factors are likely at work, but whatever the cause, its effect is deflationary and positive for the outlook for global inflation and, hence, interest rates.

Jay Powell’s speech later today and China’s inflation data tomorrow will be scrutinised for clues on the critical future interest rate trajectory.

UK Company News

Wetherspoon updated that its like-for-like (LFL) sales in the first 14 weeks of the financial year were 9.5% higher than last year, comfortably outperforming the industry benchmark again. In addition, it has fixed the cost of debt, giving it greater forecast visibility in the next few years. 

As ever, Tim Martin’s updates are well worth the time to read in full, and in today’s edition, he doesn’t disappoint. He reiterates the lingering urban myths about Spoons’ operations and why he sees it as his job to counteract them until his message reaches “all corners of the known universe.” Today, we learn that Wetherspoons hotel rooms score in Which? surveys, higher overall customer satisfaction than Sofitel, Hilton, Marriott, and Radisson. Who knew? 


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