OPEC poised to cut production further to shore up prices

OPEC and its allies have reportedly agreed to deepen its production cuts by 500,000 barrels per day in an attempt to support crude oil prices in the face of booming US output.

But the cartel, which is led by Saudi Arabia, did not release details or hold a press conference following its meeting in Vienna on Thursday. OPEC meets with allied producers including Russia on Friday.

The prospect of deeper cuts failed to wow investors, with crude prices posting only small gains on news reports that an agreement had been reached. That’s mainly because Saudi Arabia is already pumping at below its quota while others flout the agreement.

OPEC countries and allied producers have limited their production since 2017. The current deal removes 1.2 million barrels per day from world markets and is due to expire at the end of March. There is uncertainty over how much longer the coalition can stick together.

“It remains unclear what would occur in [the second quarter of 2020], potentially reflecting Saudi’s new stance that they could walk away from this deal if other countries did not comply fully,” wrote analysts at Goldman Sachs.

The current oil price is particularly important because Saudi Arabia is preparing to list shares in its state oil monopoly, Saudi Aramco, for the first time.

Saudi Aramco has sold 3 billion shares at 32 riyals ($8.53) each in its initial public offering, the company said Thursday. The IPO raised $25.6 billion, eclipsing Alibaba’s 2014 public debut to become the biggest in history.

The upshot: The more Aramco can charge for its oil, the more the company is worth.

A noisy US jobs report

The US jobs report for November will be published at 8:30 a.m. ET. GM workers returning from their strike could muddy the data, which tend to be noisy during the holiday season anyways.

Here’s what Wall Street expects from the report:

Economists predict 180,000 jobs were created during November, up from 128,000 in the previous month.

The unemployment rate is expected to remain unchanged at 3.6%.

Average hourly earnings tick up 0.3%, gaining pace from the 0.2% rate in October.

One reason to be optimistic: Initial jobless claims dropped sharply in the latest week to 203,000.

And a word of caution: Economists warn against reading too much into this month’s report, however, because of those GM workers. Their return to work could make the report appear rosier than the economic reality, and make it difficult to measure the pain caused by President Donald Trump’s trade war with China.

With the jobs report out of the way, attention will quickly turn to next week’s decision from the US Federal Reserve. Economists don’t expect any policy changes, but that doesn’t mean the central bank isn’t worth watching closely.

“If growth continues to run below 2% — especially if it slows further in the first quarter, as we expect — the policy outlook will be more dovish,” said analysts at High Frequency Economics. “It would take a significant run of better-than-expected data and developments on the trade front to keep the Fed on hold in Q1.”

The German economy is still in trouble

The impact of the trade war may be difficult to detect in the US jobs report, but it’s plain to see in new industrial production numbers for October out of Germany.

The 1.7% drop in industrial production from the previous month was much worse than economists had expected. While the DAX, the country’s benchmark stock index, managed to stay in positive territory, the report will stoke recession fears in Germany.

“The sharp drop in production in October was driven by a slump in auto production and suggests that, far from bottoming out, Germany’s industrial contraction may even be getting worse,” wrote analysts at Capital Economics. “The economy narrowly avoided recession in Q3 but we still think that GDP will decline slightly in the coming quarters.”

The world’s fourth largest economy, and Europe’s biggest, has been hit by what analysts describe as a perfect storm of negative factors. Germany relies heavily on exporters that sell lots of goods to China and the United States, which remain locked in their bitter trade dispute. Weak global auto sales have also hit the country’s carmakers.

The really bad news for Germany? There’s no relief in sight.

“Although the slump in German industry will end at some point, there is nothing in the recent surveys to suggest that that point is close,” said the analysts from Capital Economics.

Masa Son ain’t changing

Just a few weeks ago Masayoshi Son was smarting from having to bail out one of his big investments. Now he’s reminding his critics of another time he threw billions of dollars at a “crazy” entrepreneur that turned out very differently.

The SoftBank CEO appeared on a panel alongside Alibaba founder Jack Ma on Friday, where he underlined his belief in an investment style that is driven by “guts” and instinct. The talk comes just weeks after SoftBank rescued WeWork after a botched attempt to take the company public by founder Adam Neumann.

Some choice quotes from the chat, courtesy of CNN Business’ Sherisse Pham:

Son on why he invested in Alibaba: “Jack was the only one with the eyes sparkling and [he] caught my heart.”

How did Son know that Ma was the real deal? “I could smell him.”

Ma on what makes the SoftBank founder special: “He probably has the biggest guts in the world on doing investment. Very few people in the world have that courage.”

Up next

Big Lots and HeadHunter Group report earnings before the opening bell.

Also today:

• The University of Michigan consumer sentiment survey will be released at 10:00 a.m. ET.

Coming next week: A pivotal general election in the United Kingdom. Plus, rate decisions from the US Federal Reserve and the European Central Bank.