by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with news that key oil-producing countries have agreed to stop boosting output as the risk of a global glut becomes more evident. We next review several other international and US developments that could affect the financial markets today, including news that China will again allow the export of some Nexperia computer chips to avoid the risk of major disruptions to world auto production, while President Trump has said that China has promised not to attack Taiwan as long as he’s president.

Global Oil Market: The Organization of the Petroleum Exporting Countries and its Russia-led allies said they will hike oil production by another 137,000 barrels per day on December 1. However, they said they would then hold output steady to address the risk of an oil glut as global economic activity is set to slow in 2026. The announcement apparently aims mostly to keep oil prices from falling much further. However, we see no indication that the announcement will boost oil output and spur even greater OPEC+ output in the coming months.

China-Netherlands: The Chinese Ministry of Commerce on Saturday said it may exempt some Nexperia orders from an export ban that it imposed after the Netherlands seized control of the Chinese-owned Dutch chipmaker in October. In particular, global automakers were facing the prospect of having to shut down production due to a lack of Nexperia’s legacy semiconductors. China’s move to exempt at least some exports is evidently part of the framework of the US-China trade deal announced last week. News of the exemption should help buoy global stock prices today.

United States-China-Taiwan: In an interview over the weekend, President Trump said General Secretary Xi and other Chinese officials have assured members of the US administration that China will take no action to seize control of Taiwan as long as Trump is president, ostensibly “because they know the consequences.” It’s not clear if the Chinese have offered a formal commitment regarding Taiwan, but to the extent that they have, it would likely reduce the risk of a disruptive US-China military clash and be supportive of both countries’ stock markets.

China: New data shows the third-quarter earnings of China’s mainland-listed companies were up 11.6% from the same period one year earlier, accelerating from annual gains of just 1.2% in the second quarter and 3.2% in the first quarter. The figures suggest the government is having some success with its policies to rein in excess capacity and fierce price competition while also pumping up corporate and consumer stimulus. The recovery in profit growth is probably a key reason why Chinese stocks continue to appreciate strongly.

Japan-South Korea: Underscoring the positive comments from Japan’s newly installed Prime Minister Sanae Takaichi after meeting South Korea’s leader last week, South Korean President Lee Jae Myung on Saturday said he also “had a very good feeling [about Takaichi]. All my worries vanished.” The mutually laudatory remarks from Takaichi and Lee suggest that Japanese-Korean relations remain on track and are unlikely to be disrupted in a way that would weigh on either country’s economy or stock market.

United States-Nigeria: President Trump on Saturday said he has ordered the Pentagon to prepare for a possible US military intervention in Nigeria to protect its Christians from ongoing attacks by the country’s Islamist militants.

• US attacks on the militants don’t appear to be imminent, but the rhetoric may unsettle many isolationists in the president’s political coalition because it would likely remind them of the US’s long wars in Iraq and Afghanistan.
• The statement might be especially unsettling after the US’s recent participation in Israel’s attack on Iranian nuclear sites.

US Dollar: According to the Financial Times, officials at the White House, the Treasury Department, and other federal agencies are looking for ways to encourage more foreign countries to use the dollar as their main currency. The effort reportedly aims to push back against China’s effort to undermine the dollar and boost usage of the renminbi.

• Nevertheless, we see no evidence that any major economy is considering a shift to using the dollar, so the effort seems unlikely to change the greenback’s developing bear market.
• Since foreign stocks typically outperform US stocks when the dollar is weak or depreciating; any continued trend in that direction is likely to be positive for foreign stock returns versus US stock returns.

Czech Republic: After winning the most votes in last month’s elections, but not a majority, the ANO party of Eurosceptic billionaire Andrej Babiš today will sign a coalition deal with two far-right parties, allowing Babiš to become prime minister. The inclusion of the far-right parties will likely make the Czech Republic another source of irritation and policy resistance for European Union leaders in Brussels. For example, the country will now be more likely to resist aid to Ukraine, greater EU integration, and rule-of-law mandates from Brussels.

Note: Due to the federal government shutdown, we were unable to update the Business Cycle Report this month. The report will return as soon as we are able to once again access government data.

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