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Markets Cheer On OPEC Deal
Singapore Market Commentary | 02 December 2016
By: don.low
Articles (5) Profile

Global markets cheered as the Organisation of Petroleum Exporting Countries (OPEC) hashed out a deal in its 30 November meeting. The highly anticipated meeting concluded with the oil cartel, as well as non-member Russia, agreeing on terms to restrict output to rein in the oversupply situation more quickly. Brent crude futures, the international benchmark, jumped from about US$46 per barrel to around US$54 per barrel on the news, the highest in 16 months.

In Wall Street, investors also rallied on signs of a strengthening US economy. The US preliminary 3Q Gross Domestic Product (GDP) outpaced expectations by 0.2 percentage points at 3.2 percent. ADP non-farm employment in November added 216,000 jobs into the private sector, also beating expectations by 27.1 percent.

Over the past fortnight, all three US major indices managed to break record highs but the S&P 500 and Nasdaq Composite were weighed down by tech stocks. The Dow Jones Industrial Average gained 1.2 percent to close at 19,191.93, while the S&P 500 posted a modest 0.2 percent gain to close at 2,191.08. Tech-heavy Nasdaq Composite shed 1.6 percent to close lower at 5,251.11.

On the local front, the Straits Times Index closed above the 2,900-point mark for the first time in three months. In the past two weeks, the local index added 2.9 percent, to close higher at 2,919.37. Better optimism may also be attributed to the strength of China’s economy, as Beijing’s official Purchasing Managers Index (November) surprised onlookers by rising to 51.7 points against expectations of 51; suggesting that manufacturing activity expanded at a faster-than-expected rate. The FTSE ST China Index gained 3.6 percent to close at 201.1.

Sector-wise, oil and gas stocks led the gains as the FTSE ST Oil & Gas Index surged 10.8 percent to close at 340.3. Offshore and marine, as well as bank stocks, also made significant gains as FTSE ST Maritime Index and FTSE ST Financials Index surged 9.6 percent and 3.2 percent, to close at 181.9 and 791.3 respectively. Looking ahead, investors should pay some attention to the Federal Open Market Committee meeting on 13 December, which will determine the Federal Reserve’s decision on US interest rates.

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