Oil prices rose yesterday, building on a surge triggered by Opec’s output decision, while European stock markets retreated as attention switched to US jobs data and Italy’s weekend referendum.
London’s benchmark FTSE 100 index ended the day down 0.5% at 6,752.93 points, while the DAX 30 in Frankfurt fell 1.0% at 10,534.05 points and the CAC 40 in Paris shed 0.4% at 4,560.61points.
World crude prices gained 4% yesterday, after having soared almost 10% on Wednesday after Opec hammered out a deal to cut oil output for the first time in eight years.
The Opec exporters’ group, meeting in Vienna, said its 14 members had agreed on specific targets that will reduce production by 1.2mn barrels a day from next month, while key non-member Russia also committed to a reduction.
The agreement ended weeks of uncertainty and volatility on crude markets as the key players bickered over who would shoulder the biggest burden of the cuts.
“The words ‘Opec’ and ‘exceed expectations’ have rarely, if ever, been used in the same sentence.
However, yesterday’s production deal seems to have done just that,” Oanda senior market analyst Jeffrey Halley wrote in a note to clients.
“Cuts have been shared across all members, including the recalcitrant Iran and Iraq.”
Asian stock markets, playing catch up with Wednesday’s reaction on European and US indices, closed higher yesterday.
Adding to the buying sentiment was a better-than expected reading on Chinese factory output that provided fresh hope the world’s number two economy was stabilising after years of slowing growth.
In foreign exchange, the dollar rallied to its highest mark since February and close to ¥115, before easing.
Gold suffered a sell-off, falling to a near 10-month low at $1,162.11 an ounce, as investors walked away from safe-haven assets that are popular in times of uncertainty.
Strong gains by petroleum-linked equities helped lift the Dow in late morning trading yesterday, although new claims for jobless benefits rose by more than expected to 268,000 last week.
Focus now turns to the release of US jobs data today.
With dealers certain the Federal Reserve will hike interest rates this month, the figures could provide some insight into its plans for future increases over the next year.
And on Sunday, Italy votes on constitutional reform.
Tensions between Italian Prime Minister Matteo Renzi and the European Union have reached a boiling point ahead of the poll and he has suggested he would step down if voters reject the proposal.
There are fears his resignation could spark elections in which populist anti-euro parties could do well, and possibly even lead to the country leaving the EU.
An employee leans on a glass wall above the main atrium of the LSE headquarters in London. The FTSE 100 index ended the day down 0.5% at 6,752.93 points yesterday.
