The Top 5 Things to Know About The Financial Markets on Tuesday

These are the top five things about the financial markets that you should know on Tuesday, December 6:

1. Drop in oil prices as OPEC output reaches a record high

Oil prices fell, withdrawing from the previous sessions 16-month highs, following data showing OPEC’s oil production reached another record level in November, increasing to 34.19 million barrels each day from 33.82 million bpd in October.

Last week,  the Organization of the Petroleum Exporting Countries agreed to cut the production, the first time in eight years as an attempt to reduce the massive oversupply that has pushed prices lower since 2014.

The increase in production before the production cut that is set to take effect in January prompted fears that the global supply surplus could continue well into 2017.

U.S. crude oil was trading on the financial markets at {currency}51.37 per barrel at 10:55 GMT, a drop of 42 cents, or 0.81%, from its last close. Global benchmark Brent futures fell 24 cents, or 0.44%, to {currency}54.70 per barrel.

2. The Euro reaches an almost 3-week high before ECB meeting

The euro managed to maintain three-week highs, after rebounding from 20-month lows from the previous session following the rejection by the Italian voters with regards to the constitutional changes supported by the government and the ensuing resignation of Prime Minister Matteo Renzi.

Indications supported the euro that Italy would not be able to hold early elections following the resignation of Renzi. Many analysts believe that it is more likely a provisional government will take charge until next year’s election.

Investors are cautious about the upcoming ECB policy meeting on Thursday.

An announcement from the ECB about an extension of its quantitative easing program is likely. However, any indication about tapering asset purchase may offset the effect of lengthening its stimulus program.

3. Focus of Italy’s bank rescue plans

The concerns about the financial health of Italy’s rocky banking sector stayed in focus.

With  {currency}350 billion of non-performing loans weighing Italy’s banks down, if the efforts to recapitalise lenders with the use of private money fail, then the Italian government may have to activate the bail-in procedures, that could inflict losses on private bondholders.

According to the Financial Times on Tuesday, Italy’s third largest lender Monte dei Paschi could have to be bailed out over this weekend if the elaborate plan to fill a {currency}5 billion capital shortfall does not succeed.

4. European shares edge higher

The European stocks edged higher on Tuesday. Italy’s FTSE MIB was in the lead, as the bank shares started to recover following a bad start to the week.

However, shares in Monte dei Paschi (MI: BMPS) dropped 3% in unstable trading, surrounded by fears as to whether its rescue plan could be saved.

The German DAX, London’s FTSE 100, and the French CAC 40 all gained, but the weight of the lower commodity prices on energy and mining companies kept the gains subdued.

5. U.S. futures indicate a flat open on Wall Street

On Tuesday, the Wall Street futures indicated a flat opening for the top U.S. indexes on the financial markets following a day of upbeat data activity on the U.S. service sector that caused the Dow Jones Industrial Average to reach a record close.

There was a drop of 2 points or 0.01% for the Dow futures; the S&P 500 futures remained unchanged, and the Nasdaq 100 futures gained 2.12 points or 0.05%.

The data for October factory orders is scheduled to be released by the U.S. at 10:00 E.T.