Thursday 22 March 2018

Oil cut deal helps to send world markets higher

An employee of a foreign exchange trading company works near monitors showing US President-elect Donald Trump speaking on TV in Tokyo
An employee of a foreign exchange trading company works near monitors showing US President-elect Donald Trump speaking on TV in Tokyo

Gains in energy and bank stocks drove the Dow and the S&P 500 to record intraday highs on Wednesday, but losses in technology stocks dragged down the Nasdaq.

OPEC agreed to cut production to 32.5 million barrels a day, Kuwait's oil minister said. The cuts include Iraq reducing output by 200,000 bpd to 4.351 million beginning in January. Oil was up 7.8pc to a near five-week high.

The S&P 500 energy sector rose 3.9pc, after hitting a 17-month high, boosted by gains in Exxon and Chevron. Eighteen of the top 20 percentage gainers on the S&P 500 index were energy stocks.

"I suspect this move in oil is probably temporary and may not last very long, but it is giving a boost to the market," said Randy Frederick, vice-president of trading and derivatives at Charles Schwab.

November is set to be Wall Street's best month since March, with the markets rallying on Donald Trump's victory in the US presidential election.

Investors expect the market to benefit from Trump's policies, including higher spending on infrastructure and simpler regulations in the healthcare and banking industries.

Steven Mnuchin, Trump's pick for Treasury secretary, told CNBC that tax reforms and trade pact overhauls would be top priorities of the Trump administration.

US private employers stepped up hiring in November and consumer spending increased last month, the latest signs of economic strength that could further cement the case for an interest rate hike.

Traders have priced in an 89pc chance of the Fed raising rates at its meeting next month, according to Thomson Reuters data. A crucial monthly hiring report on Friday is likely to play a big role in the central bank's deliberations.

The financial index rose 1.2pc, while bond-proxy sectors such as utilities and real estate were on a sell-off mode.

"Since the election, interest rate prospects in the market have been moving up, and all the economic numbers we got today were good," Frederick said.

At 11:05am ET the Dow Jones industrial average was up 57.86 points, or 0.3pc, at 19,179.46. It hit an all-time high of 19,225.29

The S&P 500 was up 2.83 points, or 0.13pc, at 2,207.49 after hitting a record of 2,214.10.

European shares climbed to a three-week high on Wednesday, staying on track to end the month in positive territory, led by energy stocks. In Dublin the Iseq closed down slightly at 0.12pc.

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