Oil, dollar, energy shares, bond yields leap on Opec deal

TOKYO: Oil prices, and energy shares swept higher on Thursday after Opec agreed to cut crude output to clear a glut, while the dollar and bond yields rose sharply on prospects that resulting inflationary pressures will lead to higher interest rates.
The Organization of the Petroleum Exporting Countries on Wednesday agreed to its first output cut since 2008, finally taking action having seen global oil prices fall by more than half in the last two years.
Non-Opec Russia will also join output reductions for the first time in 15 years.
As a result US Treasuries resumed their rout, with prices sliding and yields spiking, to send the dollar rallying against its peers.
The yield on 30-year bonds, which are most sensitive to inflation eroding their value, climbed about 9 basis points to 2.39 per cent overnight, taking it back towards 14-month peaks marked last week.
“The reflation trade continues to work in earnest, this time Trump has taken a back seat and Opec and Russia have taken the initiative and lit the fuse under the oil price,” wrote Chris Weston, chief market strategist at IG in Melbourne.
The dollar touched a 9½ month high of 114.830 yen, adding to gains made overnight when it surged 1.8 per cent.
Steven Mnuchin, President-elect Donald Trump’s pick to lead the US Treasury, gave no hint of any unease at the strong dollar in his first remarks since being named for the job, giving traders fresh impetus to buy the US currency. “I think it is just a matter of time that the dollar will test 115 yen after Mnuchin was silent about the dollar’s strength,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.
The euro was steady at $1.0593 after shedding 0.6 per cent the previous day.
The dollar index was firm at 101.52 after rallying overnight from a low of 100.84.
In Asian equities, Australian stocks were up 0.8 per cent and Japan’s Nikkei gained more than 2 per cent on a weaker yen to hit an 11-month peak. Tokyo’s mining sub-sector jumped nearly 10 per cent and was the biggest gainer on board.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.4 per cent. Shanghai gained 0.7 per cent.
Japan Petroleum Exploration Co rose 13 per cent, posting its biggest intraday gain since March 2013. Hong Kong shares in China’s oil giants Sinopec, PetroChina and CNOOC gained as much as 4.8 per cent, 6.1 per cent and 8 per cent, respectively.
The region’s stocks did not draw much incentive from Wall Street, where shares ended mostly lower on Wednesday as drops in utilities and technology offset energy’s surge.
Spot gold touched a 10-month low of $1,163.45 on the dollar’s oil-induced surge. — Reuters