Crude rally lifts commodity currencies, bonds rise

London - Oil traded near the highest level since July last year while New Zealand’s dollar rose the most among major currencies. European bonds advanced.

Crude climbed for an eighth session, the longest streak since 2010, before Opec and other producing nations start reducing output. The currencies of Australia, New Zealand and South Africa strengthened as oil and gold prices rose.

UK gilts traded at the highest level since November, while global equities eked out post-Christmas gains, led by the stocks of commodity-producing companies.

Trading has been thin across the globe during the last week of the year, with volumes in crude oil, equities and currencies all below average.

Investors have displayed resilience in the face of shocks such as the Brexit vote and Donald Trump’s presidential win, sending the dollar to the highest level in more than a decade and propelling US equity benchmarks to records.

“Positions are being defended, not least in oil, while China worries and lower US bond yields has seen gold move higher,” said Ole Hansen, the head of commodity strategy at Saxo Bank A/S in Hellerup, Denmark, said by e-mail.
“Very thin market conditions ahead of year-end are making it difficult to read too much into the current movements.”

Commodities

Crude futures jumped 0.6% to $54.22 a barrel at 10:33 in London, extending Tuesday’s 1.7% gain. Prices are set to recover next year as production cuts help rebalance an oversupplied market, Saudi Arabia’s Energy Minister Khalid Al-Falih said last week.

Opec and 11 nations from outside the group including Russia have agreed to trim about 1.8 million barrels a day from January. Gold was up 0.2% at $1 140.66, climbing for a third day from an 11-month low.

The trading volume for natural gas for next-month delivery on the UK’s National Balancing Point exchange reached four times the average for the time of day. Prices rose 3.1% to 50.17 pence a therm.

Currencies

The New Zealand and Australian dollars rose the most among the major currencies. The New Zealand dollar rose 0.5% to 69.24 US cents, extending a rally from a near seven-month low reached on December 23.

The yen slipped 0.2% to 117.68 per dollar after falling 0.3% on Tuesday.

The Bloomberg Dollar Spot Index was little changed, still trading near the highest level in more than a decade.

Turkey’s lira retreated 0.4% as the Anadolu news agency said the country agreed with Russia on a Syria truce plan.
 
Bonds

UK gilts advanced as markets in Britain reopened after the public holiday. Yields on 10-year gilts fell three basis points to 1.314%. They earlier reached 1.302%, the lowest since November 10.  

The advance in German bunds lagged behind those in peripheral bonds from Italy and Spain.

The yield on the benchmark 10-year bund fell one basis point to 0.19%, while those on similar-maturity Spanish notes fell four basis points.

Stocks

The Stoxx Europe 600 Index swung between a gain and loss of less than 0.1%. Commodity stocks were the biggest gainers among industry groups, with BHP Billiton and Fresnillo Plc up at least 4%.

Italian lenders declined, with Banca Popolare di Milano Scarl and Banco Popolare SC down at least 3.3%. Hong Kong’s Hang Seng Index added 0.8%, rebounding from a five-month low, as banks led a rally among Chinese companies.
 
The Hang Seng China Enterprises Index gained 1.3%, the most in a month, and the Shanghai Composite Index lost 0.4%.  

The Jakarta Composite Index added 2.1%, extending Tuesday’s 1.5% gain and clocking up the biggest two-day advance since February.

The Philippine Stock Exchange Index posted the steepest advance since October.  A measure of mining companies in South Africa led equity gains, with a ratio of prices to earnings rising from its lowest level since 2013.

The S&P 500 Index extended its monthly advance on Tuesday with a gain of 0.2%. The Nasdaq Composite Index rose to an all-time high and the Dow Jones Industrial Average approached 20 000.