Following the meeting held by the Organisation of the Petroleum Exporting Countries (OPEC), oil prices declined sharply last Thursday after an agreement to extend cuts in oil output by nine months in an effort to increase prices.

In November, OPEC and other key allies had agreed to cut production by 1.8 million barrels a day from global markets, which have helped to push oil prices back above $50 a barrel this year, giving a fiscal boost to producers. The price rise has spurred growth in the US shale industry. Saudi oil minister Khalid Al-Falih said the cuts had managed to draw down inventories, though more time is needed to reduce oversupply.

Meanwhile, the composite Purchasing Manager’s Index (PMI) for the eurozone remained unchanged at 56.8 in May from April. This was forecasted to fall marginally to 56.7. Job creation also surged to one of the highest recorded as firms seek to increase capacity and meet rising demand.

The manufacturing PMI, which tracks the manufacturing sector, peaked to a 73-month high of 57.0 in May, exceeding estimates of 56.5. The services PMI, which tracks the services sector, fell to 56.2 in May from the anticipated forecast to remain unchanged at 56.4. The PMI reading showed that business activity is growing at its fastest pace for six years and in line with GDP growth.

Finally, credit rating agency Moody’s downgraded China’s credit rating by one notch from A1 to Aa3 and changed the outlook from negative to stable. The downgrade was due to concerns that it expects the financial strength of its economy will erode in the coming years as growth slows and debt continues to rise. Though the downgrade is likely to somewhat increase borrowing costs for the Chinese government and its State-owned enterprises it remained within the investment grade rating range. China’s Finance Ministry said the downgrade overstated the risks to the economy and was based on “inappropriate methodology”.

This report was compiled by Bank of Valletta plc for general information purposes only.