Asian markets extend global gain; Saudi cuts boost oil prices. After mixed U.S. jobs data, Asian markets extended a global surge on Monday as Saudi Arabia pledged major output cutbacks in July.
Brent oil rose $1.82, or 2.4%, to $77.95, while U.S. crude rose $1.77, or 2.4%, to $73.51. China’s faltering economic recovery has weighed on oil prices.
Saudi Arabia dropped its output to 9 million barrels per day in July from 10 million bpd in May, the greatest decrease in years, and a broader OPEC+ accord to curb supplies beyond 2024 also supported markets.
“With Saudi Arabia protecting oil prices from sliding too low… we think oil markets are now more prone to a shortfall later this year,” said Commonwealth Bank of Australia mining and energy commodities strategist Vivek Dhar.
Brent futures will increase to $US85/bbl by Q4 2023 even with a slow Chinese demand rebound.”
On Monday, Japan’s Nikkei (.N225) jumped 1% to a 33-year high, Australia’s resources-heavy shares (.AXJO) rose 1%, and South Korea’s KOSPI (.KS11) increased 0.5%.
After a big gain on Friday, propelled by mixed U.S. jobs data, a debt-ceiling agreement, and the possibility of a rate freeze this month, S&P 500 futures fell 0.1%, and Nasdaq futures fell 0.3% in Asian hours.
On Friday, the Dow Jones (.DJI) gained 2%, the S&P 500 (.SPX) gained 1.45%, and the tech-heavy Nasdaq (.IXIC) jumped 1% for its sixth straight week of gains, its best streak since January 2020.
On Friday, the U.S. economy added 339,000 jobs, greater than expected, raising expectations of Fed rises in July, with markets predicting a 50% possibility.
Friday’s jobs report showed slowing pay growth and unemployment, suggesting a June slowdown.
Markets expect a Fed rate pause at the upcoming policy meeting but have priced out any rate decrease by the end of the year.
After Fitch Ratings said the U.S.’ “AAA” credit rating would stay on negative watch despite the debt accord, two-year Treasuries yielded 4.503% and ten-years 3.6903% on Friday.
That helped the dollar rise 0.5% on Friday and stay at 104.16 early on Monday. The dollar rose 0.8% to 139.94 yen, and the euro fell 0.5% to $1.0706.
On speculations that domestic wage pressures will force the Reserve Bank of Australia to raise rates higher and longer, the Australian dollar rose 0.5% to $0.6605 against a strong greenback.
Tuesday’s RBA policy meeting. After a substantial minimum wage increase for the next financial year, markets are split on whether rates will stay stable or rise to 4.1%.
Wednesday’s Bank of Canada meeting. Most Reuters economists expect the BOC to keep interest rates at 4.5% for the rest of the year, but one more rate hike is likely.
