Oil, dollar and bond yields sharply higher after OPEC deal
The Organization of the Petroleum Exporting Countries on Wednesday agreed to its first output cut since 2008, with Saudi Arabia accepting "a big hit" on its production. Non-OPEC Russia will also join output reductions for the first time in 15 years to help OPEC prop up oil prices.
Crude prices, the dollar and bond yields were sharply elevated early on Thursday after OPEC agreed to a deal to reduce output to clear a supply glut that has crunched oil prices and stoked global deflationary pressures.
The Organization of the Petroleum Exporting Countries on Wednesday agreed to its first output cut since 2008, with Saudi Arabia accepting "a big hit" on its production. Non-OPEC Russia will also join output reductions for the first time in 15 years to help OPEC prop up oil prices.
U.S. crude oil soared more than 9% overnight to a one-month high just shy of $50.00 a barrel. The contracts were a fraction lower at $49.22 a barrel early on Thursday. Brent crude were just above $51.00 a barrel after rallying to a six-week peak of $52.37.
The jump in oil prices added to inflation expectations in the United States, which were already high on prospects that president-elect Donald Trump would enact reflationary policies funded by large fiscal stimulus.
As a result U.S. Treasuries resumed their rout, with prices sliding and yields spiking, to send the dollar rallying against its peers. The yield on 30-year bonds , which are most sensitive to inflation eroding their value, climbed about 9 basis points to 2.39% overnight, taking it back towards 14-month peaks marked last week.
"The reflation trade continues to work in earnest, this time Trump has taken a back seat and OPEC and Russia have taken the initiative and lit the fuse under the oil price," wrote Chris Weston, chief market strategist at IG in Melbourne.
"The consensus was that we would get some sort of loose agreement from the collective that kept oil supported, but left the market asking many more questions. What we have seen however has been real meat on the bone."
The dollar touched a 9-1/2-month high of 114.830 yen, adding to gains made overnight when it surged 1.8%. The euro was steady at $1.0596 after shedding 0.6% the previous day.
The dollar index was firm at 101.51 after rallying overnight from a low of 100.84.
The Australian dollar, sensitive to changes in commodity prices and risk sentiment, was up 0.2% at $0.7396 after losing more than 1% the previous day.
In Asian equities, Australian stocks were up 0.7% and Japan`s Nikkei gained more than 1% on a weaker yen to hit an 11-month peak
MSCI`s broadest index of Asia-Pacific shares outside Japan was up 0.1%.
The region`s stocks failed to draw much incentive from Wall Street, where shares ended mostly lower on Wednesday as drops in utilities and technology offset energy`s surge. [.N]
Spot gold was firm at $1,172.46 an ounce after sliding 1.3% overnight to a 10-month low of $1,170.35 on the dollar`s oil-induced surge.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
Power of Compounding: How many years will it take to reach Rs 3 crore corpus if your monthly SIP is Rs 4,000, Rs 5,000, or Rs 6,000
IRCTC Dividend 2024: Railway PSU announces 200% interim dividend - Check record date and other details
Power of Compounding: Salary Rs 25,000 per month; is it possible to create over Rs 2.60 crore corpus; understand it through calculations
Reduce Home Loan EMI vs Reduce Tenure: Rs 75 lakh, 25-year loan; which option can save Rs 25 lakh and 64 months and how? Know here
Top 7 Large and Mid Cap Mutual Funds with Best SIP Returns in 5 Years: No. 1 fund has turned Rs 15,000 monthly SIP investment into Rs 20,54,384; know about others
New Year Pick by Anil Singhvi: This smallcap stock can offer up to 75% return in long term - Check targets
PSU Oil Stocks: Here's what brokerage suggests on these 2 largecap, 1 midcap scrips - Buy, Sell or Hold?
09:16 AM IST