Crude-oil futures surged the most in almost a year after OPEC+ announced a production cut that threatened to worsen inflation and push global central banks to tighten monetary policy further. Treasuries fell and the dollar rose.
(Bloomberg) — Crude-oil futures surged the most in almost a year after OPEC+ announced a production cut that threatened to worsen inflation and push global central banks to tighten monetary policy further. Treasuries fell and the dollar rose.
Energy stocks rallied in Europe, with BP Plc and TotalEnergies SE climbing more than 4%. The benchmark Stoxx Europe 600 Index was little changed. Brent crude headed for the biggest gain since April 2022 while West Texas Intermediate was poised for the best day since May after the oil cartel announced an output reduction of more than 1 million barrels per day. The two-year Treasury yield, most sensitive to Federal Reserve interest-rate moves, rose 7 basis points. In the US premarket trading, Marathon Oil Corp. led gains.
Surging oil prices reverse many of the catalysts that drove global markets in the first quarter, when both Treasury yields and crude futures ended lower amid expectations that slowing global growth will encourage the Fed to pause rate hikes and opt for a cut later this year. Now, traders are rushing to review those bets: Money markets on Monday raised the odds on a quarter-point interest-rate hike in May to 65% from 55%, while a half-point of subsequent easing remained priced by year-end.
“The development comes as a blow for inflation,” Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown Plc in London, wrote in a note. “Markets are aware that if the pressure continues, central banks will need to extend or strengthen their interest-rate hiking cycles, the expectations of which will need to be repriced.”
West Texas Intermediate soared as much as 8%, the biggest intraday move in more than a year, and traded at $79.38 a barrel at 7:27 a.m. in London. The Organization of Petroleum Exporting Countries and allies including Russia pledged on Sunday to make the cuts from next month that will exceed 1 million barrels a day, with Saudi Arabia leading the way with 500,000 barrels.
“We’re now probably about to enter a very short-term down leg again,” Paul Gambles, MBMG Group co-founder and managing partner, said on Bloomberg Television. “We’ve had a year of pretty irresponsible policy guides and all the damage that they’ve done is now starting to show up.”
Treasury yields rose across the curve, with UK and German government bonds joining the selloff. The dollar was marginally higher, mostly driven by losses for the yen. The Japanese currency weakened as data showed confidence among the nation’s large manufacturers has worsened, adding to the case for the central bank to maintain ultra-easy monetary settings a while longer.
US equity-index future were mostly lower. Contracts on the S&P 500 Index were down 0.1%, while Nasdaq 100 futures fell 0.6%. The S&P 500 had jumped 3.5% last week, the most since November, while the tech-heavy Nasdaq gauge notched its biggest quarterly gain since June 2020.
Saudi stocks rallied for an eighth day Monday, the longest streak of gains since January 2022. In New York premarket tarding Marathon Oil rallied 5.4%, while APA Corp. and Halliburton Co. jumped more than 4.6% each.
Key events this week:
- Eurozone S&P Global Eurozone Manufacturing PMI, Monday
- US construction spending, ISM manufacturing, light vehicle sales, Monday
- Eurozone PPI, Tuesday
- US factory orders, US durable goods, Tuesday
- Australia rate decision, Tuesday
- Cleveland Fed President Loretta Mester speaks, Tuesday
- Eurozone S&P Global Eurozone Services PMI, Wednesday
- US trade, Wednesday
- UBS annual general meeting, Wednesday
- US initial jobless claims, Thursday
- St. Louis Fed President James Bullard speaks, Thursday
- US unemployment, nonfarm payrolls, Friday
- Good Friday. Many markets closed, including US stock and bond markets
Some of the main moves in markets:
Stocks
- The Stoxx Europe 600 rose 0.2% as of 10:19 a.m. London time
- S&P 500 futures fell 0.1%
- Nasdaq 100 futures fell 0.6%
- Futures on the Dow Jones Industrial Average rose 0.3%
- The MSCI Asia Pacific Index was little changed
- The MSCI Emerging Markets Index fell 0.3%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0849
- The Japanese yen fell 0.5% to 133.51 per dollar
- The offshore yuan fell 0.3% to 6.8943 per dollar
- The British pound was unchanged at $1.2337
Cryptocurrencies
- Bitcoin rose 1% to $28,349.5
- Ether rose 1.3% to $1,811.93
Bonds
- The yield on 10-year Treasuries advanced seven basis points to 3.54%
- Germany’s 10-year yield advanced six basis points to 2.36%
- Britain’s 10-year yield advanced five basis points to 3.54%
Commodities
- Brent crude rose 5.2% to $84.04 a barrel
- Spot gold fell 0.2% to $1,964.51 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess and Tassia Sipahutar.
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