Output bets spur oil, pound slips on Brexit fears

Sydney - Oil advanced a fourth day in the build-up to OPEC’s gathering in Vienna this week, as speculation grows that production cuts will be extended into next year. The British pound dropped after the UK threatened to walk away from talks on its departure from the EU.

Crude climbed to the highest in a month as Saudi Arabia’s energy minister said all producers participating in a deal to limit output agree on extending the cuts by nine months.

Sterling was the biggest loser among major currencies in the wake of comments from Britain’s Brexit Secretary David Davis, who said the country will walk away from negotiations unless the European Union drops demands for a divorce payment as high as €100bn.

The euro also fell and the region’s stocks were little changed.

The relative tranquility across markets suggests investors are betting that global growth can weather political turmoil in the US and Brazil, even as the world’s largest economy edges closer to another increase in borrowing costs. Money managers will be scrutinising minutes released this week from the Federal Reserve’s latest meeting to gauge the chances of a rate hike next month.

Meanwhile, President Donald Trump is trying hard to deflect attention from the domestic political crisis surrounding former FBI Director James Comey. He’s traveling in the Middle East, where US companies have signed multi-billion dollar deals in the defense, energy and infrastructure industries, before continuing on to Europe.

“With Trump on a tour, the hope is we see less news over the next couple of days - a chance for the waters to settle,” said Andrew Sullivan, a managing director for sales trading at Haitong International Securities in Hong Kong.

“It’s another overhang on the market. We’ve got all these markets trading at highs and people don’t want to miss out, but they don’t want to be caught out.”

Here are the key events for investors this week:

Donald Trump heads to the Group of Seven and NATO meetings in Europe. Fed officials Patrick Harker and Neel Kashkari are both scheduled to speak on Monday.

Twitter holds its annual meeting the same day. Shareholders will vote on a radical proposal to turn the company into a user-owned cooperative. Euro-area finance ministers discuss Greece’s bailout program, also on Monday.

The Trump administration will release its budget request on Tuesday. Minutes from the May 3 Fed policy meeting will be released on Wednesday. A key OPEC decision will be made in Vienna on Thursday. South Korea, Canada, South Africa and Thailand set interest rates.

And here are the main movers:

Commodities

West Texas Intermediate oil climbed 0.8% to $50.74 per barrel as of 12:05, extending a 2% advance on Friday. Gold slipped traded little changed at $1 256.19 an ounce. The metal jumped 2.2% last week.

Currencies 

The Bloomberg Dollar Spot Index fell less than 0.1% after its worst weekly performance since July. The pound lost 0.3% to $1.3003. The euro added 0.1% to $1.1218. The Russian rouble strengthened 0.6%.

Stocks 

The Stoxx Europe 600 Index was little changed after the worst week since November. Futures on the S&P 500 fell 0.1% after the underlying gauge increased 0.7% on Friday.

Bonds

Ten-year Treasury yields rose two basis points to 2.25% following their best week in a month. Benchmark yields in the UK were little changed at 1.09%.

Asia

A rally in Tencent helped send Hong Kong shares back toward a 22-month high. The Hang Seng China Enterprises Index jumped 1% while the Shanghai Composite slipped 0.5%. Japan’s Topix rose 0.5%.

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