Share

Stocks rally as OPEC output deal buoys oil

Hong Kong - Stocks rallied in Asia and Europe after Wednesday’s surprise announcement of an OPEC deal to cut crude output for the first time since 2008 triggered oil’s biggest jump in five months. India’s shares, currency and bonds fell after the country said it attacked terrorist targets in Pakistan. 

Energy companies led gains on the MSCI All Country World Index, which was headed for its biggest quarterly advance since 2013. India’s equities and the rupee dropped by the most since June. The ringgit was the best performer among Asian currencies as prospects brightened for Malaysia, Asia’s only major net oil exporter, and the yen slid by the most this month.

US crude traded near $47 a barrel, having surged 5.3% in the last session as the OPEC deal was announced. Sovereign bonds retreated across most of Asia and Europe amid speculation higher energy prices will revive inflation.

A global oil glut has weighed on crude prices for more than two years, spurring deflation that’s hurt corporate earnings and led to negative bond yields in two of the world’s four biggest economies.

The Organisation of Petroleum Exporting Countries said its members reached a preliminary agreement to trim production to a range of 32.5 million to 33 million barrels per day following informal talks in Algiers, though the group won’t decide on targets for each country until a November meeting in Vienna.

“The energy sector is going to be a key contributor to the rally we see after the OPEC decision,” said Tony Farnham, a strategist at Patersons Securities in Sydney. “All we’ve seen at this stage is the intention to do something, I’d like to see it more concrete and then still they have to abide by it. But, it is the first step.”

Stocks

The MSCI All Country World Index gained 0.4% as of 09:09, extending this quarter’s advance to 5.4%. A gauge of energy shares jumped 1.6% after surging 2.8% in the last session.

“OPEC’s decision to curtail production wasn’t expected, and now crude prices will likely head toward a range of $50 to $60 per barrel from $40 to $50 per barrel, which will ease global deflationary concerns,” said Nobuyuki Fujimoto, a senior market analyst at SBI Securities in Tokyo.

The Stoxx Europe 600 Index climbed 1% and the MSCI Asia Pacific Index gained 0.4%. The S&P BSE Sensex slid 1.4%, the only loss among Asian benchmarks, after India’s Director General of Military Operations said surgical strikes had been carried out on Wednesday night against terrorist launch pads in Pakistan.

China Oilfield Services jumped 11% in Hong Kong as PetroChina, Asia’s biggest oil and gas producer, rallied by the most since May. Hsin Chong plunged by as much as 57% as the stock resumed trading after Anonymous Analytics rated the property and construction company a "strong sell."

Futures on the S&P 500 Index were little changed. The underlying gauge added 0.5% on Wednesday as investors weighed the OPEC deal and comments from Federal Reserve officials.

Fed chair Janet Yellen told lawmakers that the majority of the central bank’s policy-setting group sees an interest-rate increase as likely this year, while Chicago Fed President Charles Evans said an extended period of low borrowing costs will leave less room to navigate future economic shocks.

Yellen is scheduled to speak again on Thursday, as are regional Fed chiefs for Atlanta, Minneapolis and Philadelphia.

Currencies

India’s rupee slid 0.5% versus the dollar. The ringgit strengthened 0.5%, leading gains among the currencies of oil-exporting nations. The Norwegian krone was steady following a 1% jump in the last session.

Mexico’s peso retreated from near a two-week high before a monetary policy review on Thursday, with most economists predicting interest rates will be raised. 

Taiwan also has a central bank meeting and its currency strengthened 0.2% from Monday’s close as trading resumed following a hurricane. Just over half of the economists in a Bloomberg survey forecast the island’s borrowing costs will be left unchanged, while the remainder were looking for a cut.

The Bloomberg Dollar Spot Index, a gauge of the greenback versus 10 major peers, rose 0.2% from its lowest close in more than two weeks. The yen slid 0.8%, the biggest loss among major currencies, as investors favoured higher-yielding assets outside of Japan.

Commodities

Crude oil fell 0.3% at $46.87 a barrel, retreating from a three-week high. The lower end of OPEC’s new production target equates to a nearly 750 000 barrels-a-day drop from what the group said it pumped in August. Saudi Arabia and Iran had signaled before the meeting that an agreement was unlikely in Algiers, while all but two of 23 analysts surveyed by Bloomberg predicted there would be no deal.

“The cut is clearly bullish,” said Mike Wittner, head of oil-market research at Societe Generale in New York. “The number of actual barrels that will be taken off the market is unclear. What’s much more important is that the Saudis appear to be returning to a period of market management.”

Tin gained 0.5% to trade just shy of $20,000 a metric ton, a level last seen in early 2015. The metal used for solder in electronics has jumped 17% this quarter, the best performance on the London Metal Exchange, as warehouse stockpiles fell to the lowest since 2008.

Copper and lead rose by at least 0.2%, with the latter climbing to its highest since May last year. The LME index of six industrial metals is heading for a third successive quarterly gain for the first time since 2011 helped by an improving economy in China, the biggest consumer.

Bonds

Benchmark 10-year bonds in New Zealand fell for the first time in seven days, while notes in Australia and Singapore dropped by the most in two weeks. The yield on similar-maturity U.S. Treasuries was steady at 1.57% and that for German bunds increased by one basis point to minus 0.13%.

“The rise in Treasury yields after the OPEC news was contained because the decision to really cut production won’t be finalized until November,” said Shinichiro Kadota, a foreign-exchange strategist at Barclays in Tokyo. “The Fed’s rate-increase path isn’t gaining momentum, making it unlikely for yields to extend their climb.”

Japan’s 10-year yield rose to minus 0.085%from a one-month low of minus 0.09%. India’s climbed seven basis points to 6.85%.

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.95
-0.3%
Rand - Pound
23.96
-0.3%
Rand - Euro
20.46
+0.0%
Rand - Aus dollar
12.36
-0.0%
Rand - Yen
0.13
-0.3%
Platinum
911.00
+1.6%
Palladium
1,012.02
+1.0%
Gold
2,214.22
+0.9%
Silver
24.75
+0.4%
Brent Crude
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.9%
Resource 10
57,251
+2.9%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders