Growth of the Oil Sector Boosts European Markets

On European markets on Monday morning, indices slightly rose for the sixth consecutive day, primarily due to a strong increase in stock prices in the oil sector following the rise in oil prices.

The STOXX 600 index of leading European stocks was up 0.1 percent at 9:30 AM, strengthening for the sixth day in a row.

In this context, the London FTSE index strengthened by 0.55 percent to 7,675 points, while the Frankfurt DAX rose by 0.02 percent to 15,630 points, and the Paris CAC increased by 0.28 percent to 7,342 points.

The rise in indices is mainly attributed to a jump in stock prices in the oil and gas sector by more than 3.5 percent, after OPEC+ announced a production cut, which spurred the rise in the price of ‘black gold’.

Stock prices of oil giants such as Total, Shell, and BP surged by more than 4 percent.

On the other hand, the transport and tourism sectors weakened by about 1 percent.

Similarly, on most Asian markets, stock prices increased. The MSCI index for the Asia-Pacific region, excluding Japan, was up about 0.3 percent at around 9:30 AM.

The Japanese Nikkei index strengthened by 0.5 percent, while stock prices in Shanghai and Australia rose by about 0.6 percent. In South Korea and Hong Kong, however, they fell by about 0.2 percent.

Thus, most indices are following the rise of Wall Street since Friday, after new macroeconomic data showed that the growth of the U.S. economy is gradually slowing, inflationary pressures are easing, and the labor market is gradually ‘cooling’.

This positively affected the market as it suggests that the U.S. central bank may soon end the cycle of tightening monetary policy.

Fed officials warn that it may be necessary to further raise interest rates to curb inflation, so the money market estimates a 55 percent chance that the Fed will increase key rates by another 0.25 percentage points at its next meeting in May.

However, many expect a pause in rate hikes, possibly even the end of the cycle.

Nevertheless, trading on Asian markets is cautious as this morning’s data on manufacturing activity in Japan, South Korea, and China did not impress investors.

Additionally, investors are concerned about the trend of rising oil prices, which has entered its third week, potentially reinforcing inflationary pressures again.

The price of a barrel on the London market jumped more than 5 percent this morning to $83.95, while on the U.S. market, a barrel increased by about 5.2 percent to $79.59.

The reason for this is the announcement by the Organization of the Petroleum Exporting Countries (OPEC) and its allies regarding production cuts. On Sunday, OPEC+ members announced coordinated cuts in crude oil production until the end of 2023, starting in May.

Overall, Reuters estimates that OPEC+ production will be reduced by 1.16 million barrels per day.