Oil jumps on OPEC deal; bond rout resumes

EghtesadOnline: Oil jumped on Wednesday as OPEC members clinched a deal to cut production, while upbeat U.S. economic data and comments from the U.S. Treasury Secretary nominee triggered a selloff in the bond market.

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30 November 2016

Higher crude prices bolstered shares of energy producers and stock prices around the world, with the Dow and S&P 500 hitting record highs.

An improving view on global growth, led by the United States on hopes of tax cuts and federal spending under a Trump administration, rekindled the dollar's push toward a near 14-year peak, Reuters reported.

"Everything seem to be coming together for more growth and risk appetite," said Larry Milstein, head of agency and government trading at R.W. Pressprich & Co. in New York.

Stronger investor confidence reduced safe-haven demand for gold, which was on track for its steepest monthly loss since mid-2013.

The Organization of the Petroleum Exporting Countries has agreed its first output limiting deal in eight years in an effort to deal with global supply overhang, an OPEC source told Reuters as the debates continued in Vienna on the exact size of each member's cuts.

Brent crude LCOc1 was last up $3.58, or 7.72 percent, at $49.96 a barrel. U.S. crude CLc1 was last up $3.28, or 7.25 percent, at $48.51 per barrel.

The rally in energy shares helped lift the Dow and S&P 500 to record intraday highs. The blue-chip U.S. stock indexes were also boosted by bank stocks on bets of loosening of regulation under Trump and a Republican-controlled Congress.

The Dow Jones industrial average .DJI rose 66.43 points, or 0.35 percent, to 19,188.03, the S&P 500 .SPX gained 2.69 points, or 0.12 percent, to 2,207.35 and the Nasdaq Composite .IXIC dropped 23.18 points, or 0.43 percent, to 5,356.73.

European stocks also advanced on a jump in oil companies .SXEP. But regional banks struggled after news Royal Bank of Scotland (RBS.L) failed a Bank of England stress test and Italian lenders fell before a referendum on the country's political system on Sunday.

The jump in oil prices, together with stronger-than-expected data on U.S. private job growth and regional manufacturing on Wednesday, ignited a wave of selling in bonds, pushing benchmark U.S. yields toward their highest levels since July 2015.

An aversion to own long-dated U.S. government bonds grew following comments from U.S. Treasury nominee Stevem Mnuchin who told CNBC television: "We'll look at potentially extending maturity of the debt because eventually we're going to have higher interest rates."

U.S. 10-year Treasury note yield US10YT=RR rose 10 basis points to 2.40 percent, a tad below last week's 2.42 percent that was the highest since July 2015.

German 10-year Bund yield was 4 basis points higher at 0.26 percent, while Japanese 10-year yield edged up 1 basis point at 0.03 percent. DE10YT=RR JP10YT=RR

Rising U.S. yields and upbeat domestic data pushed the dollar index .DXY up 0.72 percent at 101.66, which was still short of the near 14-year high of 102.05 set last week.

Meanwhile, gold XAU= was on track for its biggest monthly decline since mid-2013, largely pressured by the bets of a series of U.S. interest rate hikes over the next year as U.S. growth seemed to accelerating.

Spot gold prices XAU= fell $16.81 or 1.41 percent, to $1,171.53 an ounce.