Global equity markets rose on Tuesday but eased from earlier highs, as oil prices relinquished gains and turned lower after an agreement among top producers to freeze output still faced obstacles and diminished hopes for a production cut.
Top oil exporters Russia and Saudi Arabia agreed on Tuesday to freeze output levels but said the deal was contingent on other producers joining in — a major sticking point with Iran absent from the talks and determined to raise production.
Brent crude was last down 3.5 per cent at $32.18 after hitting a 12-day high of $35.55 a barrel. US crude was off 2.1 per cent at $28.83 after touching a high of $31.53. After an extended holiday weekend, Wall Street was led higher by gains in financial and consumer discretionary stocks, with the S&P financial index up 1.2 per cent after notching its best day in over 4 years on Friday.
The Dow Jones industrial average rose 62.25 points, or 0.39 per cent, to 16,036.09, the S&P 500 gained 11.09 points, or 0.59 per cent, to 1,875.87 and the Nasdaq Composite added 45.44 points, or 1.05 per cent, to 4,382.95. The MSCI World equity index was up 0.32 per cent. Shares in Europe lost ground after a 6 per cent rally in the prior two sessions as oil faded, with the pan-European FTSEurofirst 300 stocks index last off 0.6 per cent. The STOXX Europe 600 oil and gas index was down 1.7 per cent after rising as much as 3 per cent in earlier trading.
"Global production will likely continue to drop, though it could take until September to get the market back into balance," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin. "In the meantime, I expect that we could see another downward move in oil prices if the production freeze agreement falls apart."
