WHAT NEXT FOR OPEC ?

Macroeconomic environment Euro Zone: N egative surprise on confidence indexes in August with a strong er than expected decrease in economic sentiment ( -0.5 point to 111.9), which dipped for the 8th straight month. In detail, households and manufacturing confidence were in line with ex pectations (with stabilization at -1.9 and a drop of 0.3 point to 5.5 respectively ) but the do wnturn was more pronounced in services (-0.6 point to 14.7). In Germany, inflation figures for August revealed a stabilisation of headline inflatio n at 2% year-on-year (+ 0.1% on the month ) and a higher than expected deceleration of core- i nflation (from 2.1% to 1.9%). United States: The household accounts for July were in line with expectations, personal consu mption increased by 0.4% MoM (+ 0.2% in real), personal income by 0.3% and inflation up by 0.1 point, both for PCE (2.3% year-on-year) and for Core-PCE (+ 2% in year-on-year). Equities Risk-off atmosphere following turmoil in Argentina and Turkey saw equities drop generally Bond markets / Derivatives The yields of the US Tnotes were down yesterday, but the slope of the curve remained broadly unchanged. the 10y swap spread remained unchanged at 7.5bp. Money markets / Central banks EUR rates: After a small rally in the morning, concerns about EM Currencies set for a risk-off session, with peripheral spreads widening 5 to 10 bp. Due to this risk- off tone and the slowdown in issuance, swap spread widened significantly (2bp for most core papers). Implied volatilities followed the trend set by realized, putting a stop on the gamma softening seen last couple of days. FX The EUR depreciated by around 0.5% against USD on the back of weaker economic indicators in Europe (and a weaker inflation in Germany in August to 0.1% MoM from 0.3% in July). The CAD appreciated by more than 0.6% following a global optimism about NAFTA negotiations after the new deal between both Mexico and the US. The GBP keeps appreciating against EUR after M.Barnier declarations yesterday whereas the TRY is depreciating by around 4% against USD, again. Commodities Oil rose as yesterday’s bullish EIA report continued to support upwards momentum. Expectations of a high volume of export loss from Iran also contributed to the rise.