Stocks Lifted by Prospective OPEC Deal -- Update
29 September 2016 - 12:25PM
Dow Jones News
By Mike Bird
European equities followed Asian markets higher Thursday,
following the announcement of a prospective deal between major
oil-producing nations to cut production levels.
The Stoxx Europe 600 rose 0.64% in midmorning trade, led by a
4.12% rise in oil and gas stocks and a 2.59% rise in basic
resources.
In the U.S., S&P 500 futures were up very slightly, rising
0.02%. Changes in futures don't necessarily reflect market moves
after the opening bell.
Oil prices dipped slightly after a rally of more than 5% late
Wednesday. West Texas Intermediate crude oil prices dipped 0.3% to
$46.91 a barrel, and Brent crude prices fell 1.2% to $48.64 after
the previous day's rally.
Members of the Organization of the Petroleum Exporting Countries
said they had proposed cutting their collective output to between
32.5 million and 33 million barrels a day, down from August levels
of 33.2 million barrels a day. The group, however, deferred the
task of completing a plan to make those cuts until November.
Analysts were cautious about the impact of the deal.
"We're not actually talking about a very large reduction here,
it's more like a freeze at pretty high production levels," said
Mike Bell, global market strategist at J.P. Morgan Asset
Management. "It's very hard for oil to go much above $60 per barrel
because U.S. producers pretty much all start to become profitable
again."
Goldman Sachs commodities analysts held their end-of-year
forecast for WTI crude oil prices at $43 for 2016, and $53 for
2017.
"This agreement is the first since the oil bear market started
in 2014 and as such will likely provide support to prices, at least
in the short term," said the analysts in a research note early
Thursday morning. "However uncertainty is set to remain high in
coming months, with so far no comments from the Saudi
minister."
In the U.S., S&P 500 futures were up very slightly, rising
0.02%. Changes in futures don't necessarily reflect market moves
after the opening bell.
Banks were also among the gainers in Europe, with the Stoxx 600
Banks index up 0.53%. Deutsche Bank AG shares rose 0.56%. The
German lender's shares have been watched closely by investors
following The Wall Street Journal's report that the bank has been
asked to pay $14 billion by U.S. authorities to settle a set of
high-profile mortgage-securities probes stemming from the financial
crisis.
Commerzbank AG bucked the trend, with shares falling 1.99% after
the bank announced that it was scrapping its dividends and laying
off around 20% of its workforce.
In currency markets, the yen fell by 0.5% against the U.S.
dollar, touching its weakest levels since last week's Bank of Japan
meeting. BOJ Governor Haruhiko Kuroda gave a speech in early
European hours, reiterating that the central bank could cut
benchmark interest rates or expand asset purchases further.
Sovereign bond yields ticked up slightly, with Germany's 10-year
bund yield rising from minus 0.146% at Wednesday's close to minus
0.117%.
Asian shares rose across the board following the OPEC news, led
by a 1.4% climb for Japan's Nikkei 225.
India's Sensex index dropped 1.64% after an announcement that it
had conducted what the military described as "surgical strikes"
against terrorist bases in Pakistan-controlled Kashmir.
Kenan Machado
and Ese Erheriene contributed to this article.
Write to Mike Bird at Mike.Bird@wsj.com
(END) Dow Jones Newswires
September 29, 2016 07:10 ET (11:10 GMT)
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