Over the weekend, non-OPEC members agreed to deliver on nearly 600,000 bbl per day of production cuts including 300,000 from Russia. In addition to this, Saudi Arabia indicated that it is prepared to make even deeper cuts than it has already announced to fix the oil market. Comments that Saudi Arabia and Russia, among others, are putting aside their political differences to make these deals happen, suggests that the market share of the last two years is over (for the moment anyway).
This news has sparked a big rally for crude oil, sending WTI and Brent both up 4.0% to their highest levels in over a year. The logjam for WTI in the low $50s appears to have finally been broken. Oil currencies like CAD, NOK and RUB are all rallying in tandem with oil. This may also have a positive impact on energy stocks today.
Stock markets around the world are mixed to start the week. US index futures are flat (Dow and S&P) to down 0.4% for the NASDAQ. The FTSE and Dax are down 0.2%. Italy's FTSE MIB is up 1.1% with the troubled Monte Paschi bank trying to raise private capital before going to the government for a bailout. EUR and GBP are bouncing back a bit today.
Chinese indices fell with Shenzen down 2.4% and the Hang Seng down 1.4% dragged down by problems in China's insurance sector.
Capital continues to leave defensive havens, keeping the pressure on gold. US treasury bond yields traded above 2.5% for the first time in two years, as traders speculate a US rate hike this week could be followed by several more next year. This is higher than Italy with its banking problems at 2.0%, Canada at 1.75% and the UK at 1.50% even with Brexit moving forward. Between the higher US dollar and rising US interest rates dampening the earnings outlook of a rising US stock market, something may need to give soon and the FOMC meeting is the most likely flashpoint.