Stocks seen firm as Saudi to cut oil output

(Alliance News) - Stocks in London were set to open higher on Monday, as focus moves to the oil market and to services PMI prints, after a default on US government debt was avoided but Saudi Arabia announced plans to cut oil production.

IG says futures indicate the FTSE 100 index of large-caps to open up 7.7 points, 0.1%, at 7,614.98 on Monday. The index closed up 117.01 points, or 1.6% at 7,607.28 on Friday.

Sterling was quoted at USD1.2434 early Monday, lower than USD1.2476 at the London equities close on Friday. The euro traded at USD1.0700, lower than USD1.0728. Against the yen, the dollar was quoted at JPY140.01, edging down from JPY140.09.

Oil prices rose by just over a dollar a barrel, as major oil-producing nations announced on Sunday they will cut output.

Brent oil was trading at USD77.12 a barrel, higher than USD75.89 late Friday.

Saudi Arabia will reduce how much oil it sends to the global economy, taking a unilateral step to support the sagging cost of crude after two earlier production cuts by members of the Opec+ alliance of major oil-producing countries failed to push prices higher.

The announcement of the Saudi cuts of one million barrels per day came on Sunday after a meeting of the alliance at OPEC headquarters in Vienna.

The rest of the Opec+ oil producers agreed to extend earlier cuts in supply through the end of 2024.

"The week kicked off with a jump in oil prices...Oil bears – decidedly daring - rushed in to sell the rally triggered by the Saudi decision, as expected. Most of the gains are gone even before Europeans woke up," said Swissquote Bank's Ipek Ozkardeskaya.

Meanwhile, there was some positive economic data from Asia on Monday, with the latest purchasing managers' index surveys pointing to strong growth in the service sectors of China and Japan.

Japan saw record expansions in business activity, new business and new export orders, with China also seeing strong expansion in both supply and demand during the month.

In Japan on Monday, the Nikkei 225 index was up 1.9%. In China, the Shanghai Composite was down 0.1%, while the Hang Seng index in Hong Kong was up 0.2%. The S&P/ASX 200 in Australia was up 1.0%.

Equities in New York had rallied on Friday, as US lawmakers voted through a bipartisan agreement to raise the debt limit, averting a catastrophic default.

The Dow Jones Industrial Average ended up 2.1%, the S&P 500 up 1.5% and the Nasdaq Composite up 1.1%.

President Joe Biden on Saturday signed the debt legislation into law.

Nevertheless, ratings agency Fitch said it is maintaining a 'rating watch negative' on the US "as [it] consider[s] the full implications of the most recent brinkmanship episode and the outlook for medium-term fiscal and debt trajectories".

Gold was quoted at USD1,944.43 an ounce early Monday in London, lower than USD1,963.45 late on Friday.

In the UK corporate calendar on Monday, there are full-year results from Sirius Real Estate, Itaconix, and Celadon Pharmaceuticals.

The economic calendar has more services PMI prints, including those from the EU, the UK and the US.

By Elizabeth Winter, Alliance News senior markets reporter

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