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Here’s how ugly it could get for stocks if OPEC can’t reach a deal

BarbaraKollmeyer
Reuters

The OPEC waiting game

Signals out of what is shaping up as the most important OPEC summit in two years aren't encouraging.

Talk of discord between members, a Russia no-show and failed premeeting meetings have been dogging crude, which is crumbling on Tuesday. Goldman Sachs, for one, points out Brent futures LCOF7, +0.37% are pricing in a just 30% chance of a production-cut deal getting done. Others are putting the odds of success on Wednesday at less than that.

Our call of the day says the next 24 hours will be crucial for all markets.

If no deal is agreed, that will hit not just oil, but also forex and equity markets from Middle Eastern stocks to Wall Street, says Naeem Aslam, chief market analyst at Think Markets.

Read: 4 most likely outcomes, and market reactions, from OPEC’s pivotal meeting

Aslam thinks OPEC will toss markets a small bone. Even so, he warns that Wall Street is vulnerable, because upward momentum for stocks has been in part underpinned by the recovery in oil prices this year. The other driver—the U.S. election—can’t juice this market until investors see what the new Trump administration will do.

Aslam says the S&P 500 could drop well below 2,100 if OPEC fails. “If there is no deal, the Saudis are going to make sure they dump the market with as much oil as possible because now the real trade war will begin and they won't care about anything.” That means squeezing out the small players and oil in the mid $20s. Ugly for stocks.

If doomsday happens, the bright spots will be airlines and ocean shipment companies, both which benefit from weak oil.

http://www.marketwatch.com/story/heres-how-ugly-it-could-get-for-stocks-if-opec-cant-reach-a-deal-2016-11-29?link=MW_popular