Asia: Asian equities rallied the most in three weeks as a deal to cut global oil output lifted energy shares, while evidence of strength in the U.S. economy sank bonds and supported the dollar. Australia’s Santos Ltd. surged 13%, Japan’s Inpex Corp. 11% and China’s CNOOC Ltd. 6% after the OPEC-led pact to reduce production for the first time in eight years sent U.S. crude to just below $50 a barrel. Japanese exporter stocks also got a boost after better-than-expected private U.S. jobs data pushed the dollar back to a nine-month high versus the yen. Yields on government debt in Australia and New Zealand rose after a slump in Treasuries, which had their worst month since 2009 in November. The oil deal, which until Wednesday’s meeting seemed in peril, provided further support for so-called reflation trades after Donald Trump’s election as U.S. president added to expectations for fiscal stimulus and Federal Reserve rate increases. Friday’s official U.S. payrolls data is the next focal point, after ADP Research Institute reported the biggest increase in private-sector workers since June. China’s official factory gauge came in Thursday at 51.7, above the 51 reading expected by economists, as smokestack industries regained momentum. The MSCI Asia Pacific Index added 1% the most since Nov. 10, as a sub-gauge of energy stocks jumped 4.5%. Japan’s Topix index returned to its highest level since January, rallying 1.8%, while Hong Kong’s Hang Seng Index was up 0.7%. Australia’s S&P/ASX 200 Index rose 0.8%, snapping a three-day drop as New Zealand’s S&P/NZX 50 Index climbed 0.5%, while the Kospi in Seoul was 0.1% higher.
U.S Equities: Stocks moved mostly lower as gains in blue-chip energy companies and banks were not enough to make up for losses in the broader market. The bond market took heavy losses, with the 10-year U.S. Treasury note rising to its highest level in a year and a half. The higher yields sent bond substitutes like utilities, telecommunications and real estate stocks sharply lower. Oil stocks climbed after OPEC nations, agreed to trim production for the first time in eight years. The S&P 500 Index soared at the market’s open and surpassed its record high, but then retreated and was down 0.27% to 2,198.81. The Dow also touched a record high before fading and was essentially flat at 19,123.58. The Nasdaq Composite fell more than 1% to 5,323.68. Energy stocks climbed 4.82% as a group. Devon Energy Corp. gained 14.63% and Marathon Oil Corp. rose 20.8%, both hitting 52-week highs. Stocks have rallied in November, with all major U.S. indexes touching records, on speculation president-elect Donald Trump will increase fiscal spending to stimulate the world’s largest economy. The S&P 500 has climbed 3.4%, on track for its biggest monthly advance since July. Investors are now awaiting the government payrolls data on Friday for clues on the pace of future interest-rate hikes from the Federal Reserve. The probability of a rate increase in December is at 100 %, compared with a 68 % chance at the start of November. 7 of 11 sectors negative with Utilities -2.72%, telecom -1.64%, consumer staples -1.4%, tech -1.09%, health care -0.9%, REITs -0.83%, Consumer Discretionary -0.74%, industrials +0.15%, materials +0.89%, financials +1.21% & energy +5.09%. Total S&P 500 volume 1.84b vs 1.37b in prior session at this time, 5 prior sessions’ avg. 1.32b.
Commodities: An agreement by OPEC to reduce oil production sent oil prices soaring overnight and led to strong gains for the energy sectors in Europe and the United States.
During a meeting, OPEC agreed to cut production by 1.2 million barrels per day to 32.5 million barrels from January next year. It was the first time since 2008 the organisation had agreed to cut production. Non-OPEC member Russia will also curb production for the first time in 15 years to help support global oil prices. Saudi Arabia will take the bulk of the cuts by slashing output by 500,000 barrels of oil per day to 10.06 million barrels. Fellow Gulf members of OPEC, the United Arab Emirates, Kuwait and Qatar would cut by a total of 300,000 barrels per day. In an unexpected development, Iraq agreed to reduce production by 200,000 barrels per day. Iran was allowed to boost production slightly from its October level, after arguing it needed to regain market share that had been lost due to Western sanctions.