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Oil surges on production deal, global bonds are selling off, and will Trump appoint Tillerson as secretary of state? Here are some of the things people in markets are talking about today.
A barrel of West Texas Intermediate for January delivery was trading 5 percent higher at $54.07 at 4:41 a.m. ET. The surge comes after non-OPEC countries including Russia pledged to cut output next year, and Saudi Oil Minister Khalid Al-Falih said he was willing to cut the kingdom’s production even more sharply than already promised. Oil analysts are upping their price forecasts for the commodity with $60 a barrel seen as early as this week, and $70 by mid-2017 as U.S. shale production could take up to 12 months to increase output enough to recalibrate the dial. Goldman Sachs Group Inc., however, expects a much quicker response from shale producers, and sees crude at $55 a barrel in the first half of next year.
Bonds sell off
The yield on benchmark 10-year U.S. Treasuries climbed above 2.5 percent for the first time since October 2014, as traders remain convinced that the Federal Reserve will hike interest rates at this week's meeting. A Bloomberg survey of economists, meanwhile, suggests the era of negative yields on 10-year German bonds may be over, with not a single respondent expecting the instrument to achieve that level between now and 2018. In China, government debt was caught up in a broad-based selloff overnight, with the one-year sovereign yield rising 15 basis points.
UniCredit SpA's asset sale continues, with Amundi SA agreeing to buy Pioneer Investments in a deal that will give the Italian lender a net capital gain of 2.2 billion euros ($2.3 billion), lifting its common equity Tier 1 ratio by 78 basis points, the Milan-based institution said. This follows closely on the bank's sale of a stake in Bank Pekao SA of Poland last week, providing a 55 basis points CET1 boost. Shares in Unicredit were trading 3.8 percent higher at 5:12 a.m. ET. Banca Monte dei Paschi di Siena SpA is pressing ahead with a 5 billion-euro capital increase as it tries to avoid a state rescue. It is seeking investor support for an extended debt-to-equity swap. Shares in the bank were trading 7.7 percent higher at 5:16 a.m. ET.
Overnight, the MSCI Asia Pacific Index fell 0.5 percent, while Japan's Nikkei 225 Stock Average rose 0.8 percent to erase its losses for the year. In Europe, the Stoxx 600 Index was 0.4 percent lower at 5:25 a.m. ET as a rally in energy producers wasn't enough to lift the wider market. S&P 500 futures slipped 0.2 percent.
Tillerson for secretary of state?
Exxon Mobil Corp. Chief Executive Officer Rex Tillerson has emerged as President-elect Donald Trump's leading pick for the secretary of state role, with an announcement expected in the next few days. Tillerson, who has close ties to Russia, would be a controversial choice for the leading diplomatic role. Trump's transition team was dismissive of concerns over Russian meddling in the election, saying it was time to 'move on' after the big victory.
What we've been reading
This is what's caught our eye over weekend.
- Odd Lots Podcast: These are the mathematical concepts investors should know.
- China's stocks and bonds slump, with yuan heading towards an eight-year low.
- Christine Lagarde goes on trial in France.
- India starts to offer discounts for trading online.
- South Korea's terrible, horrible, no-good, very bad year.
- Mr. BOJ is shaping policy behind the scenes.
- Jose Canseco has some big-league advice for Donald Trump when it comes to the Federal Reserve.