Oil Surges after Output Deal; China Shares Fall

Crude oil soared to the highest in 17 months as efforts to cut production boosted oil-linked currencies while helping send 10-year Treasury yields above 2.5 percent the first time since October 2014. Chinese equities tumbled, and Japan’s Nikkei Stock Average erased losses for the year.

Oil jumped more than 5 percent in New York and London after Saudi Arabia signaled it will cut output by more than previously agreed amid a weekend deal to tackle oversupply with competitors such as Russia. The dollar slipped, following a 1 percent advance over the previous two sessions, before an anticipated interest-rate hike from the Federal Reserve. Government bonds from Australia to America retreated, while shares in Shenzhen headed for the biggest drop since February as property companies declined.

The oil deal has lit a fire under crude prices, exacerbating the pressure on bonds amid the implications for global price pressures. Strong U.S. economic data and Donald Trump’s election win have further stoked expectations the Fed will pull the trigger on Wednesday. The prospect of higher U.S. borrowing costs by the end of 2016 has bolstered the dollar while adding to a rout in government debt since the Nov. 8 election.

Markets in India and Thailand are shut for holidays. China may report on foreign direct investment, money supply and lending between now and Thursday. Retail sales and factory output are due Tuesday.

Commodities

· West Texas Intermediate crude gained 4.7 percent as of 7:02 a.m. London time, climbing to $53.98 a barrel as Brent added 4.3 percent to $56.69. Both are headed for their highest settlement prices since July last year

· The deal between OPEC members and outside nations, including Russia, was agreed at a meeting in Vienna at the weekend. It should usher in the first global petroleum cuts in 15 years and covers about 60 percent of the world’s output

· Copper futures rallied as much as 1.4 percent in New York before erasing gains

· Gold fluctuated, trading down 0.1 percent in the spot market at $1,158.19 an ounce

Stocks

· The MSCI Asia Pacific Index was down 0.4 percent, even as energy shares climbed 0.5 percent. Technology companies fell the most as a group

· Shenzhen shares tumbled 4.9 percent and the Shanghai Composite Index lost 2.4 percent as curbs on insurers’ stock trading and concern about the outlook for the property market spurred selling. Hong Kong’s Hang Seng Index slipped 1.4 percent.

· The Nikkei 225 Stock Average jumped 0.8 percent, giving it a gain of 0.6 percent for the year after plunging as much as 21 percent through June. Japan’s Topix index gained 0.4 percent, paring its decline for the year to 1 percent

· Euro Stoxx 50 futures were up 0.2 percent in early trading. S&P 500 Index futures declined 0.1 percent

· Banks and technology shares drove the S&P 500 to a 3.1 percent climb last week, with the U.S. benchmark reaching successive all-time highs as the Dow Jones Industrial Average also rose to records

Currencies

· The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, slipped 0.1 percent after gaining 0.5 percent on Friday to finish the week higher. The greenback dropped at least 0.3 percent against the Mexican peso, Canadian dollar and Norwegian krone

· The Turkish lira tumbled for a third day, slumping 1.1 percent after twin bombings in Istanbul on Saturday killed 38 and wounded more than 150 people

· The Korean won retreated for a second session, losing 0.2 percent amid concern the political instability sparked by President Park Geun-hye’s impeachment could hurt the economy

Bonds

· Ten-year Treasury yields rose as much as four basis points to 2.5042 percent, after climbing eight basis points last week.

· Yields on Australian bonds due in a decade added four basis points, or 0.04 percentage point, to 2.86 percent, while those on New Zealand debt added four basis points to 3.31 percent.

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