There is a skate park feel to trading as the painful retreat of equities and oil feels like a trick gone bad. The oil fail today has many reasons – the FOMC hawkish tone, the Saudi OPEC doubts, China confidence crumbling (Auto sales of 12% in Oct), US politics, Italian banks, Brexit deal doubts. What is clear for markets is you don’t get off the half-pipe accident without some blood, sweat and tears. Overnight economic stories didn’t help – UK industrial production weaker, UK 3Q GDP in line but September weaker, UK trade still a drag, China PPI/CPI in line but not helpful for growth, Australian SOMP upbeat on growth but sees more risks on trade. Beyond the economic headlines – which are mixed at best – you have these tidbits to consider:

• Italian banks are moving BTP holdings to the back-book. The ability to not mark-to-market liquid sovereign bonds seems problematic for ECB and QE ending. Accounting changes don’t make the losses better as this is about collateral for other risk and hampers future loans and growth.
• China business and consumer confidence in doubt. The number of “uncertain” word counts in recent 4Q outlooks from China companies and the drop in consumer spending (which will be known more clearly next week) driving doubts about policy stimulus working. 
• European growth outlooks are being marked down. Even with oil lower, the outlook for 4Q growth is lower and the EU Commission reports from yesterday are hurting. 

When you mix this all together the uptrend for the USD holds as it’s the October safe-haven and perhaps still the same for November. What seems most hurt in the week isn’t the EUR or CNY but oil and that maybe the key for watching risk in equities into the weekend.

Question for the Day: Is Oil the next key for markets? The OPEC weekend meeting maybe more important for markets than the further analysis of US mid-terms and US/China trade hopes. Oil went into a bear market yesterday and today, WTI trades below $60. The risk of less price pressures from inflation has helped some nations – India being one obvious winner – but for the US this is mixed.  For Saudi it’s a problem.  For OPEC its worse – Saudi is 1/3 of the total output and its future is more linked to the US and Aramco IPO than others. The WSJ reports on a Saudi study about the end of OPEC. The OPEC study aims to “assess the short/medium-term consequences of a dissolution of OPEC,” according to an overview reviewed by The Wall Street Journal. It is intended to determine how the global oil market, and Saudi finances, would look “if coordination between oil producing countries disappear,” according to the overview. The overview describes two scenarios to investigate, if OPEC isn’t in the picture: 1. All big oil producers, including Saudi Arabia, act competitively—fighting each other for market share; 2. Saudi Arabia, instead, attempts to leverage its massive oil output alone to help balance global supply and demand in an attempt to keep oil prices steady—similar to the role that members say OPEC plays today.