Oil Hits 6-week High After OPEC Deal, Sterling Jumps

Oil swept to a six-week high on Thursday after OPEC agreed to cut crude output to help clear a glut, while sterling hit a three-month peak after traders interpreted comments from a senior UK official as a crack in the government’s “hard Brexit” line.

Global bond yields rose on prospects that resulting inflationary pressures from oil’s surge will lead to higher interest rates, with the benchmark 10-year U.S. Treasury yield matching November’s 16-month high.

European stocks dived, shrugging off the bounce in Asian shares and following the S&P 500’s fall the previous day instead. U.S. futures pointed to another slight decline at the open on Wall Street.

The Organization of the Petroleum Exporting Countries on Wednesday agreed to its first output cut since 2008, finally taking action after global oil prices fell by more than half in the last two years.

Non-OPEC Russia will also join output reductions for the first time in 15 years.

U.S. crude oil added to overnight gains of 9 percent to reach $50.00 a barrel for the first time since October. Brent crude, which soared $4 overnight, touched a six-week peak of $52.73 a barrel.

The jump in oil prices added to inflation expectations in the United States, which were already rising on prospects that President-elect Donald Trump would adopt reflationary policies using a large fiscal stimulus.

“We’ve had a spike in oil prices plus better data, so we’re seeing the reflation trade come back,” said Martin van Vliet, senior rates strategist at ING.

As a result the rout in U.S. Treasuries resumed, with yields pushing higher, especially on longer-dated bonds. The yield on 10-year and 30-year bonds

Author: NewsAdmin

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