Global markets mixed as oil prices slump on OPEC+ plans to unwind cuts

US inflation slowed in April, raising hopes a Fed rate cut could still be on the cards for this year (Frederic J. BROWN)
US inflation slowed in April, raising hopes a Fed rate cut could still be on the cards for this year (Frederic J. BROWN)

Global markets finished mixed on Monday, as traders on Wall Street attempted to look beyond weaker than expected manufacturing data, and markets reacted to falling oil prices.

The commodity dropped following an announcement by the OPEC+ group of major crude producers that they plan to start unwinding output cuts later this year.

In New York, the Dow Jones Industrial Average retreated 0.3 percent, while the broad-based S&P 500 edged up by 0.1 percent. The tech-rich Nasdaq Composite Index closed up 0.6 percent.

Despite the lackluster end to the day, investors appeared to have shrugged off fresh private sector data which indicates that US manufacturing contracted for a second straight month in April.

"But it's another indication, in our opinion, that the economy is slowing," First National Bank of Omaha chief investment officer Kurt Spieler told AFP.

- Oil slips -

Oil fell sharply in the wake of Sunday's announcement by the Saudi-led OPEC+ group of major crude oil producers that they would maintain output levels but begin to restore production from October.

That came as questions about China's economic recovery and a spike in US stockpiles cause investors to fret over demand.

"This deal looks to draw a line under attempts to drive energy prices sharply higher for the time being," said Joshua Mahony, chief market analyst at Scope Markets.

Brent, the international benchmark, fell 3.4 percent to below $80 a barrel for the first time since February, while the price of a barrel of West Texas Intermediate dropped by 3.6 percent.

"Opec+ surprised the market when it announced its decision on production quotas on Sunday," said XTB analyst Kathleen Brooks.

"While it will extend cuts for some key Opec members like Saudi Arabia and Russia well into 2025, it will also start to roll back some measures as soon as October, which is earlier than the market had expected," she added.

European natural gas prices meanwhile jumped more than 10 percent after the closure of a pipeline linking key producer Norway with Britain.

The Langeled pipeline was shut after "operational problems" occurred at the Sleipner Riser offshore platform that will require repair work, said Randi Viksund, spokeswoman for the Norwegian pipeline operator Gassco.

- Equities finish mixed -

Major European indexes were broadly higher, although London's FTSE 100 finished the day in the red.

Following Monday's US manufacturing data, attention now turns to the release of US jobs data on Friday, as Fed officials have said looser monetary policy will depend on signs that tightness in the job market, which can fuel wage growth, is easing.

Before then, the European Central Bank is widely expected to begin cutting rates at its meeting Thursday even though inflation remains above the bank's target of two percent.

"If so, this will be the first time ever that it has led the US Federal Reserve in easing monetary policy," Morrison said.

Asian investors started June in a buoyant mood, pushing Hong Kong solidly higher thanks to a surge in Chinese tech firms, while Tokyo, Sydney and Seoul also posted gains, though Shanghai edged lower.

- Key figures around 2015 GMT -

New York - S&P 500: UP 0.1 percent at 5,283.40 points (close)

New York - Dow: DOWN 0.3 percent at 38,571.03 points (close)

New York - Nasdaq: UP 0.6 percent at 16,828.67 (close)

London - FTSE 100: DOWN 0.2 percent at 8,262.75 (close)

Paris - CAC 40: UP 0.1 percent at 7,998.02 (close)

Frankfurt - DAX: UP 0.6 percent at 18,608.16 (close)

EURO STOXX 50: UP 0.4 percent at 5,003.54 (close)

Tokyo - Nikkei 225: UP 1.1 percent at 38,923.03 (close)

Hong Kong - Hang Seng Index: UP 1.8 percent at 18,403.04 (close)

Shanghai - Composite: DOWN 0.3 percent at 3,078.49 (close)

Euro/dollar: UP at $1.0903 from $1.0852 on Friday

Pound/dollar: UP at $1.2802 from $1.2745

Euro/pound: UP at 85.14 from 85.12 pence

Dollar/yen: DOWN at 156.21 from 157.30 yen

Brent North Sea Crude: DOWN 3.4 percent at $78.36 per barrel

West Texas Intermediate: DOWN 3.6 percent at $74.22 per barrel