Dubai: A jump in oil prices on Monday prompted global stocks to rise, as investors get a brief relief from being caught in between the tedious US-China trade disagreements that continue to hurt economies worldwide.
Oil prices bounced back after slumping at the end of last week, with U.S. West Texas Intermediate (WTI) crude jumping 1.9 per cent to $56.3 per barrel, with Brent crude futures rising 1.34 per cent to $61.3 a barrel.
Sentiment in the market got a boost from record high U.S. crude production, expectations that OPEC and its allies will extend existing oil output cuts when they meet this week, with Saudi Arabia calling for steady oil prices ahead of the listing of its state oil giant Saudi Aramco.
“OPEC+ is likely to roll over its existing oil production cut agreement at its upcoming meeting in December,” said Edward Bell, commodity analyst at Emirates NBD.
“Deeper cuts would help move closer toward a balanced market but the scale of cuts required would mean a substantial slowdown in domestic economies,” Bell said. “Compliance with production cuts will remain an issue and we expect Saudi Arabia to again provide the bulk of output restraint.”
The analyst added that markets will end up in a surplus for 2020, with a “particularly heavy” over-supply seen in the first-half of next year, adding that he expected average prices for Brent at $57 a barrel and WTI at $55 a barrel.
Oil price gains helped push MSCI’s broadest gauge of world shares up 0.1 per cent, hovering near an all-time peak hit at the start of last year.
Also, China’s factory activity expanded at the quickest pace in almost three years in November, with solid increases in output and new orders at the world’s second-largest economy, a private business survey showed on Monday. This followed upbeat official data released over the weekend.
Major indices in China and Hong Kong rose. The CSI300 index rose 0.5 per cent at the end of the session, while the Shanghai Composite Index gained 0.4 per cent. The Hang Seng index added 0.5 per cent, while the Hong Kong China Enterprises Index gained nearly 1 per cent.
Safe haven assets took a hit after gains in riskier assets. The Japanese yen hit a six-month low, while gold prices dipped about a per cent.
On the US-China trade front, investors continue to monitor for definite cues on the trade tiff. A report from news website Axios saying that tensions in Hong Kong had stalled Sino-U.S. trade talks, citing a source close to the U.S. negotiating team, was not enough to dent the sentiment. Analysts said that stocks have become less prone to swings from chatter based on trade talks.