The dollar was stagnant on Tuesday as traders stuck to the sidelines a day ahead of the Federal Reserve’s latest policy decision. The Fed begins its two-day rate-setting meeting today. It is widely expected that they will announce a 25-basis point rate hike tomorrow. However, since this decision is so widely expected, the market will be much more focused on what the Fed either says or hints about future rate hikes in 2017.
Oil prices edged higher amid hopes that a move by OPEC and other major oil producers to cut output could help bring crude supply and demand into balance quickly.
Crude for January delivery rose 0.3% or 15 cents to $52.98 a barrel on the New York Mercantile Exchange, for the fourth successive day of gains. Brent, the global benchmark, increased 0.05% or 3 cents to $55.72 on London’s ICE Futures Exchange, also for the fourth day in a row.
According to the International Energy Agency’s monthly oil report, if members of OPEC and non-OPEC nations follow through on their promises to cut production for the next six months, the market will likely become under-supplied by the middle of next year.
The IEA report also disclosed that global oil supplies increased in November to 98.2 million barrels a day as rising OPEC output outweighed a drop in non-OPEC production. OPEC’s production increased by 300,000 barrels a day in November to a new record, even as members were negotiating to cut back on production. Even Saudi Arabia, who lead the negotiation increased output, the agency said.
Given the increase, OPEC would now have to cut 1.7 million barrels a day to reach its target ceiling of 32.5 million barrels a day. A significant increase from the 1.2 million-barrel-a-day cut it initially suggested.
In U.S. equities, the Dow came within 50 points of hitting the 20,000 level, finally closing 0.58% higher or 114.78 point higher at 19,911.21. The S&P 500 rose 0.7%, led by gains in energy and technology shares, and the tech-heavy Nasdaq Composite rose 1%.
Elsewhere, the Stoxx Europe 600 rose 1.1%, with Italian banks among the best performers. The Index was helped by a sixteen percent surge in the shares of UniCredit, after Italy’s largest lender said it would launch a €13 billion rights issue to boost its capital base.
Earlier, Japan’s Nikkei Stock Average, which rose above the 19000 mark Monday for the first time since 2005, added 0.5% as the dollar continued to strengthen against the yen.
