Oil rallies on OPEC deal; global bonds end dismal November

Reuters
Two people walk towards the entrance of the Reserve Bank of New Zealand located in the New Zealand capital city of Wellington, March 22, 2016. REUTERS/Rebecca Howard/File Photo

By Richard Leong

NEW YORK (Reuters) - Oil prices jumped around 9 percent on Wednesday as OPEC members sealed a deal to cut production, while upbeat U.S. economic data and comments from the U.S. Treasury Secretary nominee triggered a bond market sell-off, marking a miserable November for Treasuries.

Higher crude prices bolstered shares of energy producers and stock prices around the world, with the Dow and S&P 500 stock indexes touching 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 advance toward a near 14-year peak.

"Everything seems 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.

Gold lost its safe-haven lustre as investor confidence strengthened, posting its worst 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 a global supply overhang, an OPEC source told Reuters as the debates continued in Vienna on the size of each member's cuts.

Brent crude (LCOc1) settled up $4.09, or 8.82 percent, at $50.47 a barrel. U.S. crude (CLc1) settled up $4.21 or 9.31 percent at $49.44.

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

The Dow Jones industrial average (.DJI) ended up 1.98 points, or 0.01 percent, to 19,123.58, the S&P 500 (.SPX) closed down 5.85 points, or 0.27 percent, to 2,198.81 and the Nasdaq Composite (.IXIC) finished down 56.24 points, or 1.05 percent, to 5,323.68.

For November, the Dow gained 5.4 percent, the S&P rose 3.4 percent and the Nasdaq increased 2.6 percent.

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. [.EU]

Europe's broad FTSEurofirst 300 index (.FTEU3) rose 0.53 percent at 1,350.85, raising its November gain to 0.9 percent.

The MSCI world equity index , which tracks shares in 45 nations, fell 0.50 point or 0.12 percent, to 413.43, reducing its monthly gain to 0.6 percent.

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 since July 2015.

An aversion to owning long-dated U.S. government bonds grew after U.S. Treasury nominee Steven Mnuchin 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 rose 9 basis points to 2.39 percent, a tad below last week's 2.42 percent that was the highest since July 2015.

The German 10-year Bund yield was 4 basis points higher at 0.26 percent, while the Japanese 10-year yield edged up 1 basis point at 0.03 percent.

Bonds across the world lost about $2 trillion in market value since the Nov. 8 U.S. election before they recovered a bit this week, according to Bank of America Merrill Lynch (.MERGBMI) data.

Rising U.S. yields and upbeat domestic data pushed the dollar index (.DXY) up 0.59 percent at 101.53, which was short of the near 14-year high of 102.05 set last week. It was up about 3 percent for a second month in November.

Meanwhile, gold lost 8.2 percent in November for its biggest monthly decline since June 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 $16.06 or 1.35 percent, to $1,172.28 an ounce.

(Additional reporting by Caroline Valetkevitch in New York and Marc Jones and Jemima Kelly in London; Editing by Nick Zieminski and James Dalgleish)