Energy shares buoyed global stocks yesterday as crude prices added to the previous session’s gains on optimism over a plan among Opec members to curb output.
The expected agreement lifted the currencies of crude-producing countries like Norway and Canada overnight while the safe-haven Japanese yen dropped almost one per cent versus the US dollar yesterday, weighed further by strong US economic data.
Crude prices wobbled initially after Wednesday’s near six per cent surge as investors questioned whether Opec’s first deal to limit output since 2008 would balance the oversupplied oil market.
Stocks on Wall Street traded lower, with utilities, often sold when Treasury yields rise, as the worst performer. Healthcare and tech stocks were the largest weights.
“The markets are taking a step back after a couple of pretty good days,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.
The Dow Jones industrial average fell 37.39 points, or 0.2 per cent, to 18,301.85, the S&P 500 lost 4.47 points, or 0.21 per cent, to 2,166.9 and the Nasdaq Composite dropped 22.87 points, or 0.43 per cent, to 5,295.68.
The energy index of the S&P 500 rose 0.5 per cent.
The European oil and gas index soared 4.4 per cent in its best day in three months, but the pan-European STOXX 600 index closed flat.
The pan-European FTSEurofirst 300 index ended up 0.1 per cent, while MSCI’s gauge of stocks across the globe rose 0.2 per cent.
In Russia, a major oil producer, the dollar-denominated RTS share index rose 2.3 per cent.
Oil companies, along with the weaker yen, also lifted Tokyo shares, which closed 1.4 per cent higher. Nikkei futures rose 0.6 per cent.
The Organisation of Petroleum Exporting Countries agreed to cut output to a range of 32.5 million-33 million barrels per day from the group’s current estimated output of 33.24 million bpd, ministers at the talks in Algiers said.
US crude was up 1.9 per cent at $47.95 a barrel and Brent last traded at $49.40, up 1.5 per cent on the day.
While the deal helped lift currencies of oil exporters on Wednesday, including the Norwegian crown and the Canadian dollar, those currencies were little changed yesterday, partly on concerns over the feasibility of Opec implementing the deal.
US economic growth was less sluggish than previously thought in the second quarter as exports grew more than imports and businesses raised their investments, while other data showed America’s trade deficit for goods shrank in August, boding well for third-quarter growth.
The Japanese yen, often sought when investor risk appetite is low, was last down 0.8 per cent at 101.48 per dollar, having fallen as low as 101.84.
US Treasury yields inched higher as traders sought riskier assets. Benchmark 10-year notes fell 5/32 in price to yield 1.5823 per cent, up from 1.567 per cent on Wednesday.
However, US yields remain trapped in tight ranges and could resume their recent downtrend given geopolitical tensions and political uncertainty, analysts said.