Dollar near one-month high on bounce in U.S. yields, weak pound

TOKYO (Reuters) – The dollar held near a one-month high against its peers on Wednesday, supported by a rebound in U.S. yields and weakness of the pound as its battering from uncertainty about Brexit continued.

The greenback was lifted as long-term U.S. Treasury yields bounced from three-month lows. [US/]

The dollar index .DXY versus a basket of six major currencies stood at 97.420 after rising overnight to 97.545, its highest since Nov. 13.

“In addition to higher Treasury yields, the weakening pound is providing a key boost to the dollar,” said Yukio Ishizuki, senior forex strategist at Daiwa Securities in Tokyo.

“With Brexit talks seemingly headed towards a dead end, this has been a golden opportunity for speculative market players to short the pound.”

Sterling took a big hit at the start of this week after British Prime Minister Theresa May delayed a parliamentary vote on her Brexit deal.

The pound GBP=D4 suffered further on Tuesday on media reports that May’s parliamentary colleagues believed they had sufficient numbers to mount a no-confidence vote in her leadership.

The British currency was little changed at $1.2495 after dropping to $1.2480 overnight, its weakest since April 2017. The currency has lost 1.8 percent this week.

The euro was a shade higher at $1.1333 EUR= after shedding 0.3 percent the previous day.

The dollar was a shade higher at 113.49 JPY= after touching a one-week peak of 113.52.

China’s yuan was firmer in offshore trade CNH=D4 at 6.886 to the dollar, extending gains from the previous day.

The yuan firmed on Tuesday on news that Beijing and Washington were discussing the next steps in their trade talks.

U.S. President Donald Trump on Tuesday told Reuters he would intervene in the Justice Department’s case against a top executive at China’s Huawei Technologies HWT.UL if it would serve national security interests or help close a trade deal with China.

The Australian dollar, a gauge of broader risk sentiment, was up 0.35 percent at $0.7228 AUD=D4.

The 10-year Treasury note yield US10YT=RR inched up to 2.889 percent after rising more than 2 basis points on Tuesday.

The yield had dropped to a three-month low of 2.825 percent at the start of the week, with dovish comments from Fed officials and soft U.S. data further reinforcing views of a slowdown in the tightening cycle.

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Oil prices rise as OPEC-led supply cuts expected to stabilize markets

SINGAPORE (Reuters) – U.S. oil prices climbed on Wednesday, supported by expectations that an OPEC-led supply cut announced last week for 2019 would stabilize markets.

Disruptions to Libyan oil exports after local militia seized the country’s biggest oilfield, El Sharara, were also buoying prices, traders said.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $52.15 per barrel at 0023 GMT, up 1 percent from their last settlement.

International Brent crude oil futures LCOc1 had yet to trade.

Analysts said a decision by the Organisation of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers including Russia to cut supply by 1.2 million barrels per day (bpd) would likely stabilize prices, although several said they did not expect the agreement to push markets much higher.

“OPEC production curbs will stabilize the market,” ANZ bank said on Wednesday.

Crude prices had lost a third of their value between early October and the announcement of the cuts.

Fereidun Fesharaki of energy consultancy FGE said in a note that the OPEC-led cuts would likely be “insufficient to mop up the inventories in the targeted three-month period till the end of the first quarter of 2019”.

As a result, FGE said prices were “likely to hover in the $55-60 per barrel range for Brent, with WTI sitting some $5-10 per barrel below this given current fundamentals”.

Fawad Razaqzada, market analyst at futures brokerage Forex.com, said “additional doubts were raised after the decision to reduce output was made on Friday, when … OPEC refused to specify which country would cut how much”.

Undermining the supply cuts is soaring output in the United States, where crude production C-OUT-T-EIA has hit a record 11.7 million bpd.

The United States is set to end 2018 as the world’s top oil producer, ahead of Russia and Saudi Arabia, with the U.S. Energy Information Administration (EIA) saying on Tuesday that the nation’s annualised average output would be 10.88 million bpd over the year.

The 2018 output increase would be 1.53 million bpd, the EIA said, adding that it expected production to average an unprecedented 12.06 million bpd in 2019.

“U.S. oil production growth continues relentlessly and will probably continue for the foreseeable future to offset any supply-side adjustments from the OPEC+ group,” Razaqzada said.

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Trade d├ętente bounce masks unease over Brexit and growth

LONDON (Reuters) – Stocks jumped on Tuesday as investors clung to hopes of a detente in the China-U.S. trade war and picked through the rubble of conflagrations in other top economies, with heightened uncertainty over Brexit and French protests.

A report China is moving to cut import tariffs on American-made cars drove European stocks to extend gains strongly as auto stocks jumped and the market interpreted this as a sign China is ready to make concessions on trade.

The report came after China’s Vice Premier Liu He exchanged views on the next stage of trade talks with U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer.

S&P 500 and Dow futures were up 0.8 to 1 percent, indicating a strong open on Wall Street.

Euro zone stocks rose 1.8 percent and Germany’s DAX climbed 2 percent while Britain’s FTSE 100 rose 1.6 percent. Germany’s DAX, the most China-sensitive market in Europe, last week entered bear market territory.

MSCI’s world equity index gained 0.4 percent – set for its first day of gains after a five-day losing streak. China’s blue-chip index had risen 0.5 percent overnight.

Sterling, meanwhile, still floundered near 20-month lows as the market sought clarity on the next steps for Brexit after Britain’s prime minister postponed a vote on her deal.

WHERE NEXT FOR BREXIT?

Sterling hesitantly rose 0.4 percent to $1.2610 as traders sought to price in a range of possibilities after Prime Minister Theresa May’s abrupt decision to postpone a parliamentary vote on her Brexit agreement on Monday, a move that sent the pound spiralling down to $1.2505.

Goldman Sachs analysts said volatility across UK assets has increased, with option markets pricing a wider range of outcomes including Brexit without a deal, a last-minute agreement or another referendum on EU membership.

“We still think a no deal is a very low probability, but the uncertainty will persist for some time,” said Richard Turnill, global chief investment strategist at Blackrock.

“The events of the last few days show you why there’s caution,” he added.

May embarked on the first leg of a trip to meet European leaders on Tuesday, seeking support for changes to her Brexit deal, while at home some lawmakers agitated for a vote of no confidence.

The EU was adamant the withdrawal agreement, including its most contentious element – a “backstop” for the Northern Ireland frontier – could not be renegotiated.

“I have no doubt a no-deal Brexit would rank pretty high on the list of market accidents … and have a global impact,” said Andreas Utermann, CEO of Allianz Global Investors.

FRENCH FOCUS

Bond markets were focused on France as investors fretted over fiscal spending after the government announced concessions aimed at defusing weeks of often violent protests.

President Emmanuel Macron announced wage rises for the poorest workers and tax cuts for pensioners.

This sent French bond yields to their highest level over Germany’s in 19 months, with the spread over the safe-haven German Bund hitting 48.5 basis points.

Macron’s announcement “leaves open the question about how the new fiscal measures will be covered financially,” wrote UniCredit analysts.

Olivier Dussopt, junior minister for public accounts, said on BFM TV the measures would cost 8-10 billion euros ($9.1-$11.4 billion).

(For a graphic on ‘Macron measures push France/Germany 10-year yield spread wider’ click tmsnrt.rs/2PwwJLc)

The dollar index, which measures the U.S. dollar against a basket of major currencies, slipped 0.3 percent to 97.078.

In emerging markets, stocks rose 0.4 percent from one-month lows hit on Monday.

The shock resignation of India’s central bank governor hurt India’s NSE share index initially, but it closed up 0.6 percent, helped by election results in three states which were not as poor for the ruling party as some had expected.

Oil prices rebounded strongly from earlier losses, having sunk on Monday.

U.S. crude futures climbed 1.2 percent to $51.61 and Brent futures rose 0.8 percent to $60.47.

Growth worries still stalked markets.

Japan’s economy provided the latest negative data point, contracting the most in over four years in the third quarter.

Disappointing economic data has fanned worries about corporate earnings and factory output, with the Sino-U.S. trade battle clouding the outlook for growth.

All sectors in Europe are in the red this year after oil became the last to give up all its 2018 gains, as investors licked their wounds and awaited the end of a bruising year.

(For a graphic on ‘All European sectors erase 2018 gains’ click tmsnrt.rs/2zUCdu4)

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Oil falls nearly 2 percent on stocks sell-off, pares OPEC deal gains

NEW YORK (Reuters) – Oil fell nearly 2 percent on Monday, echoing the weakness in global stock markets as the focus returned to demand growth concerns and the crude prices erased some of the gains made last week on an OPEC-led decision to cut output.

A gauge of global equities stumbled, putting it on track for its fifth straight daily decline, as losses in Europe and Asia extended to Wall Street on new signs the U.S.-China trade spat was impacting world economic growth.

The market was also weighed down by confusion stemming from British Prime Minister Theresa May’s postponement of a parliamentary vote on her Brexit deal and sluggish data from the world’s largest economies including the U.S, China, Japan and Germany in recent days.

“The stock market and oil market correlation is back on today,” said John Kilduff, a partner at Again Capital Management in New York. “These worries about the global economy and the demand outlook that follows on that for oil are a bigger and bigger negative for the market.”

Brent crude oil futures fell 75 cents to $60.96 a barrel by 11:54 a.m. EST (1654 GMT), while U.S. futures fell 95 cents to $51.66 a barrel.

Prices closed 3 percent higher on Friday after the Organization of the Petroleum Exporting Countries and some non-OPEC producers, including heavyweight Russia, said they would cut oil supply by 1.2 million barrels per day (bpd) from January.

The deal will be signed in three months’ time in Saudi Arabia, when OPEC and its allies will decide on extending the agreement after six months, the UAE’s energy minister said on Monday.

“Friday’s agreement was a seemingly good one, or maybe we should say the best one under the current circumstances,” Tamas Varga, a strategist with PVM Oil Associates, said.

“As good as it looks, our view is that it will not be able to provide long-term price supports because it could not help global oil inventories deplete.”

(For a graphic on ‘Global oil market balance’ click tmsnrt.rs/2Prr1Kl)

Global equities have fallen by nearly 8 percent so far this year, battered by concern about slowing corporate earnings and the threat to the broader economy from an escalating trade dispute between the United States and China.

A steep increase in the pace of crude supply growth this year, especially in the world’s three largest producers – the United States, Saudi Arabia and Russia – has made a number of analysts wary about the prospect of demand being sufficient to mop up extra oil.

“As usual, prices are not a target of OPEC+ policy, but our takeaway is that current price levels largely meet the interests of most participating countries,” consultant JBC Energy said.

Edward Bell of Emirates NBD bank said “the scale of the cuts … isn’t enough to push the market back into deficit” and that he expected “a market surplus of around 1.2 million bpd in Q1 with the new production levels”.

Oil prices have fallen sharply since October on signs of an economic slowdown, with Brent losing almost 30 percent in value.

(For a graphic on ‘Asia refining profit margins’ click tmsnrt.rs/2QKMLpl)

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Oil slips in line with bearish equities

LONDON (Reuters) – Oil fell on Monday, in line with further declines in global stock markets, erasing the gains made last week when producer group OPEC and other key exporters agreed to cut their crude output from January.

Brent crude oil futures fell $1.02 on the day to $60.65 a barrel by 1045 GMT, while U.S. futures lost 98 cents to trade at $51.63 a barrel.

Prices rose 3 percent on Friday after the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers including heavyweight Russia said they would cut oil supply by 1.2 million barrels per day (bpd).

“They had one thing in common – none of them wanted to see inventories rise further. They could disagree on prices and upon the size of the cuts, but to really see inventories moving higher? No one wanted that,” SEB commodities strategist Bjarne Schieldrop said.

“Firstly, we’ll get some (price) stability, even if oil is weighed down by bearish equities. That really took the glow off oil,” he said.

OPEC has agreed to cut by 800,000 bpd, led mainly by Saudi Arabia, while non-members will cut by 400,000 bpd, with most of that decrease shouldered by Russia.

(For a graphic on ‘Global oil market balance’ click tmsnrt.rs/2Prr1Kl)

Global equities have fallen by nearly 8 percent so far this year, battered by concern about slowing corporate earnings and the threat to the broader economy from an escalating trade dispute between the United States and China.

A steep increase in the pace of crude supply growth this year, especially in the world’s three largest producers – the United States, Saudi Arabia and Russia – has made a number of analysts wary about the prospect of demand being sufficient to mop up extra oil.

“The surge in U.S. supply in recent months should be a reason for caution,” Bank of America Merrill Lynch said in a note on Monday.

U.S. bank Morgan Stanley said the cut was “likely sufficient to balance the market in 1H19 and prevent inventories from

building”.

Not all analysts were so confident.

Edward Bell of Emirates NBD bank said “the scale of the cuts … isn’t enough to push the market back into deficit” and that he expected “a market surplus of around 1.2 million bpd in Q1 with the new production levels”.

Oil prices have fallen sharply since October on signs of an economic slowdown, with Brent losing almost 30 percent in value.

(For a graphic on ‘Asia refining profit margins’ click tmsnrt.rs/2QKMLpl)

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Brent crude oil rises after producer supply cut, but outlook still weak

SINGAPORE (Reuters) – Brent crude oil rose on Monday after producer club OPEC and some non-affiliated suppliers last Friday agreed to a supply cut from January.

Despite this, the outlook for next year remains muted on the back of an economic slowdown.

International Brent crude oil futures were at $62.02 per barrel at 0601 GMT, up 35 cents, or 0.6 percent, from their last close.

Prices surged on Friday after the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers including heavyweight Russia announced they would cut oil supply by 1.2 million barrels per day (bpd), with an 800,000-bpd reduction planned by OPEC members and 400,000 bpd by countries not affiliated with the group.

The shutdown of the 315,000-bpd El Sharara oilfield in Libya also helped push Brent, traders said.

U.S. West Texas Intermediate (WTI) crude futures were weaker, however, dropping 12 cents from their last settlement to $52.59 per barrel, weighed by surging U.S. output as the booming American oil industry is not taking part in the announced cuts.

The OPEC-led supply curbs will be made from January, measured against October 2018 output levels.

“Our key conclusion is that oil prices will be well supported around the $70 per barrel level for 2019,” analysts at Bernstein Energy said on Monday.

Despite the cuts, that was still a price forecast reduction of $6 per barrel as Bernstein lowered its crude oil demand forecast from 1.5 million bpd previously to 1.3 million bpd for 2019.

U.S. bank Morgan Stanley said the cut was “likely sufficient to balance the market in 1H19 and prevent inventories from

building”.

It added that it expected “Brent to reach $67.5 per barrel by 2Q19, down from $77.5 before.”

Not all analysts expect the cuts to be sufficient to end oversupply.

Edward Bell, commodity analyst at Emirates NBD bank, said in a note on Sunday that “the scale of the cuts…isn’t enough to push the market back into deficit” and that he expected “a market surplus of around 1.2 million bpd in Q1 with the new production levels.”

Oil prices have fallen sharply since October on signs of an economic slowdown, with Brent losing almost 30 percent in value.

Japan, the world’s third-biggest economy and No.4 oil consumer, on Monday revised its third quarter GDP growth down to an annualized rate of minus 2.5 percent, down from the initial estimate of minus 1.2 percent.

Meanwhile the two world’s biggest economies, the United States and China, are locked in a trade war which is threatening to slow global growth and battering investor sentiment.

Despite the expectations of a slowdown, physical demand on the ground remains healthy.

China, the world’s biggest oil importer, over the weekend reported November crude oil imports rose 8.5 percent from a year ago, to 10.43 million bpd, marking the first time China imported more than 10 million bpd. That leaves the world’s second-biggest economy on track to set yet another annual import record.

Strong demand is being driven by Chinese purchases for strategic reserves, but also by new refineries, triggering excess supply of fuels, filling up storage tanks and eroding refinery profits across Asia.

(GRAPHIC: Asia refining profit margins – tmsnrt.rs/2QKMLpl)

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Dollar slips as U.S. job data fans growth worries; pound, yuan on backfoot

TOKYO (Reuters) – The dollar slipped against the yen and the euro on Monday after soft U.S. payrolls data fuelled speculation that the Federal Reserve may stop raising interest rates sooner than previously expected.

The British pound also was on the defensive as Prime Minister Theresa May’s deal to exit the European Union looks set to be rejected by parliament on Tuesday, while the Chinese yuan dipped in offshore trade following weak trade and inflation data over the weekend.

“We have rising tensions between the United States and China over Huawei and the Brexit vote in the UK parliament. The risk-off mood is likely to prevail for now,” said director of forex at Societe Generale.

The dollar slipped 0.2 percent against the yen to 112.52 JPY=, edging near Thursday’s 5 1/2-week low of 112.23.

U.S. non-farm payrolls increased by 155,000 jobs last month, below economists’ median forecast of 200,000 jobs.

Some Fed policymakers have struck a cautious tone about the economic outlook, possibly flagging a turning point in its monetary policy.

Federal Reserve Governor Lael Brainard said on Friday the economic picture was broadly positive but that risks were growing overseas and in the corporate debt markets at home.

St. Louis Federal Reserve Bank President James Bullard repeated his call for the Fed to pause its current cycle of interest rate increases.

Investors are growingly worried that rising tensions with China could took a toll on the U.S. economy.

Although U.S. President Donald Trump and Chinese President Xi Jinping struck a 90-day truce on tariffs earlier this month, U.S. Trade Representative Robert Lighthizer said on Sunday there is a “hard deadline”, noting U.S.-China trade negotiations need to reach a successful end by March 1.

New tensions between the two countries flared last week after Meng Wanzhou, chief financial officer of China’s tech giant Huawei Technologies HWT.UK was arrested in Vancouver at the request of the United States.

As the dollar wilted, the euro edged up 0.2 percent to $1.1400 EUR=, even as “yellow vest” anti-government protesters wreaked havoc in Paris during the weekend.

French President Emmanuel Macron will address the country at 2000 Paris time (1900 GMT) on Monday as he seeks to placate the protesters.

In London, Theresa May faces an internal revolt against her Brexit deal ahead of the crucial vote in the parliament on Tuesday. Despite the bleak outlook, May plans to push ahead with the vote while senior lawmakers in her own party piled pressure on her to go back to Brussels and seek a better offer.

A rejection could throw plans for Britain’s exit into turmoil and leave her own political future hanging in the balance.

The British pound GBP=D3 was softer at $1.2722. Against the euro, it changed hands at 89.65 pence per euro EURGBP=D4, near its weakest level since late September.

The Chinese yuan ticked down 0.15 percent in offshore trade after weak data pointed to a further cooling in the world’s second-biggest economy.

China’s November exports rose just 5.4 percent from a year earlier, the weakest performance since a contraction in March and well short of the 10 percent forecast in a Reuters poll, adding to evidence that demand is weakening globally.

Import growth was 3 percent, the slowest since October 2016, and a fraction of the 14.5 percent seen in the poll.

The downbeat trade data reinforced views that Chinese authorities will have to roll out more support and stimulus measures soon to stabilise the economy, even if a trade deal with Washington is reached.

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Battered Asia shares try to rally on talk of Fed pause

SYDNEY (Reuters) – Asian share markets tried to find their footing on Friday as speculation the Federal Reserve might be “one-and-done” with U.S. rate hikes helped salve some wounds after a punishing week.

MSCI’s broadest index of Asia-Pacific shares outside Japan nudged up 0.l3 percent, though that followed a 1.8 percent drubbing on Thursday.

Japan’s Nikkei added 0.9 percent and E-Mini futures for the S&P 500 edged up 0.1 percent.

Concerns over Sino-U.S. relations remain heightened after the arrest of smartphone maker Huawei Technologies Co Ltd Chief Financial Officer Meng Wanzhou, which threatened to chill talks on some form of trade truce. [nL1N1YA1YR]

Markets also face a test from U.S. payrolls data later in the session amid speculation the economy was heading for a tough patch after years of solid growth.

Fed Chairman Jerome Powell emphasized the strength of the labor market in remarks made late Thursday. [nL1N1YB2GD]

Economists polled by Reuters forecast jobs rose by 200,000 in November after surging 250,000 in October. [nL1N1Y91Q8]

“A view has developed of U.S. growth normalizing a little faster than expected from the fiscal ‘sugar rush’, while inflationary pressures remain contained given the sharp fall in the oil price,” said National Australia Bank economist Tapa Strickland.

“Payrolls will be very important in helping to validate whether the economy is indeed slowing faster than expected.”

The mood brightened a little after the Wall Street Journal reported Fed officials are considering whether to signal a new wait-and-see mentality after a likely rate increase at their meeting in December. [nL4N1YB5N6]

That only added to recent feverish speculation the central bank was almost done on hiking rates given concerns on global growth and the disinflationary impact of collapsing oil prices.

Interest rate futures <0#FF:> rallied hard in massive volumes with the market now pricing in less than one hike next year. A month ago they had been wagering on three increases.

The news helped Wall Street pare early steep losses and the Dow ended 0.32 percent lower, while the S&P 500 lost 0.15 percent. The Nasdaq even added 0.42 percent.

FLATTENED

Treasuries extended their blistering rally, driving 10-year yields down to a three-month trough at 2.8260 percent, before last trading at 2.8973 percent.

Yields on two-year notes fell a huge 10 basis points at one stage on Thursday and were last at 2.77 percent.

Investors also steamrolled the yield curve to its flattest in over a decade, a trend that has historically presaged economic slowdowns and even recessions.

“The sort of flattening of the yield curve that we have seen recently usually indicates that investors think the Fed is nearing the end of a tightening cycle, and that rate cuts may even be on the horizon,” argued analysts at Capital Economics.

The seismic shock spread far and wide. Yields on 10-year paper sank to the lowest in six months in Germany, almost 12 months in Canada and 16 months in Australia.

The sea change in expectations took a toll on the U.S. dollar as bulls had been counting heavily on a steady widening rate differential to propel the currency.

The greenback eased against a basket of currencies to 96.779, and fell to 112.69 yen from a 113.85 high at the start of the week. The euro was up around 0.5 percent on the week so far at $1.1376.

Cyber currency Bitcoin took another spill, sliding more than 6 percent to $3,446.17.

In commodity markets, gold firmed to near a five-month peak as the dollar eased and the threat of higher interest rates waned. Spot gold stood at $1,237.61 per ounce.

Oil was less favored, however, falling nearly 3 percent on Thursday after OPEC and its allies ended a meeting without announcing a decision to cut crude output. [nL8N1YB1II]

OPEC had tentatively agreed to cut output but was waiting for a commitment from non-OPEC heavyweight Russia before deciding volumes. [O/R]

Brent futures had ended with a loss of $1.21 at $60.67 a barrel. U.S. crude edged up 6 cents in early trade Friday to $51.55, having lost $1.31 overnight.

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Oil slides as OPEC ties supply cut to Russia; Moscow said to only back limited move

SINGAPORE (Reuters) – Oil prices fell on Friday, pulled down by OPEC’s move to delay a final decision on output cuts as its awaits support from heavyweight supplier Russia, which is reported to not want to reduce its output by more than 150,000 barrels per day (bpd).

International Brent crude oil futures LCOc1 fell below $60 per barrel early in the session, trading at $59.40 per barrel at 0704 GMT, down 66 cents, or 1.1 percent from their last close.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $50.97 per barrel, down 52 cents, or 1 percent.

The declines came after crude slumped by almost 3 percent the previous day, with the Organisation of the Petroleum Exporting Countries (OPEC) ending a meeting at its headquarters in Vienna, Austria, on Thursday without announcing a decision to cut crude supply, instead preparing to debate the matter on Friday.

Russia wants to cut its oil output by a maximum of 150,000 bpd for the first three months of 2019, RIA news agency cited a source as saying on Friday.

Analysts expect OPEC to cut more than Russia, but warn that a big cut will be needed to reverse recent price falls.

“Reversing the overwhelmingly bearish price sentiment will likely require a credible and cohesive message from the OPEC meeting. Even a 1 million bpd cut could lead to a ‘sell the news’ reaction in the short term,” U.S. investment bank Jefferies said on Friday.

“If no agreement is reached, oil prices have significant downside,” it added.

SUPPLY SURGE, PRICE PLUNGE

Oil producers have been hit by a 30-percent plunge in crude prices since October as supply surges just as the demand outlook weakens amid a global economic slowdown.

Oil output from the world’s biggest producers – OPEC, Russia and the United States – has increased by 3.3 million bpd since the end of 2017, to 56.38 million bpd, meeting almost 60 percent of global consumption.

That increase alone is equivalent to the output of major OPEC producer the United Arab Emirates.

The surge is largely down to soaring U.S. crude oil production C-OUT-T-EIA, which has jumped by 2.5 million bpd since early 2016 to a record 11.7 million bpd, making the United States the world’s biggest oil producer.

As a result, the United States last week exported more crude oil and fuel than it imported for the first time on records going back to 1973, according to data released on Thursday.

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Dollar struggles on Fed pause talk ahead of jobs data

TOKYO (Reuters) – The dollar struggled to recover in Asian trade on Friday, hobbled by fresh speculation that a widely expected rate hike later this month could be the last before Federal Reserve hits the pause button on its tightening cycle.

Investors have been alarmed by recent sharp falls in U.S. treasury yields, with an inversion of the yield curve signaling a sharp economic slowdown or even a recession down the road.

Their immediate focus was on November U.S. non-farm payrolls, unemployment and wage data due to be released later on Friday for clues to how the world’s top economy is faring.

“Arguably, one of the strongest parts of the U.S. economy has been the labor market,” said Chris Weston, Melbourne-based head of research at foreign exchange brokerage Pepperstone. “If we see any cracks appearing in there, the U.S. dollar will start to fade off.”

Dollar investors were given more reason to be cautious after the Wall Street Journal reported Fed officials are considering whether to strike a wait-and-see attitude after a likely rate increase at their meeting in December.

The dollar index .DXY, which measures the greenback against a basket of six major peers, was virtually flat at 96.802. The index shed 0.3 percent during the previous session, closing at one-week low and down 0.9 percent from a 17-month peak hit on Nov. 12.

The benchmark U.S. 10-year Treasury yield US10YT=RR was last at 2.896 percent after dipping overnight to its lowest level since late August.

The dollar has slipped after Fed Chairman Jerome Powell said last week that U.S. interest rates were nearing neutral levels, which markets interpreted as signaling a slowdown in rate hikes.

If the Fed raises interest rates as expected at its Dec. 18-19 meeting, it would be the fourth hike this year, and investors are focused on how much further the tightening cycle has to run.

“The guidance going forward will be key to yields and equity market moves, which right now foreign exchange markets seem to be reacting to,” said Bart Wakabayashi, Tokyo branch manager at State Street Bank.

Interest rate futures implied traders see no more than one rate increase from the Fed in 2019, compared with previous expectations for possibly two rate hikes, according to CME Group’s FedWatch program.

On Friday, the dollar was steady against the euro EUR= at $1.1378. Against the Japanese yen JPY=, it tacked on 0.1 percent to 112.79 yen.

The single currency had gained 0.3 percent against the dollar during the previous session while the yen rose about a quarter of a percent.

The Canadian dollar sat at C$1.3388, basically unchanged from Thursday’s close. The loonie had hit a 1-1/2-year low of C$1.3445 against the greenback overnight after the Bank of Canada suggested the pace of future rate hikes could be more gradual.

The Australian dollar AUD=D4 was flat at $0.7236, not far off a three-week trough of $0.7192 hit on Thursday.

The greenback has been pressured this week by an inversion in part of the U.S. yield curve seen as an early warning sign for a potential recession.

The spread between the two-year and five-year U.S. Treasury yields inverted this week and the two-year/10-year spread was at its tightest in more than a decade amid a sharp fall in long-term rates.

Historically, the economy has taken anywhere between 12 months and 24 months to fall into a recession when the yield curve inverts.

Some market participants believe the dollar index may have peaked out, State Street’s Wakabayashi said.

Financial institutions and companies usually take extra efforts to fund their operations over the year-end, which often leads to increased demand for the dollar as its the world’s most liquid currency, but Wakabayashi believed it was less pronounced this year.

“The dollar funding over the calendar year-end hasn’t really been as aggressive as we’ve seen in the past few years,” he said. “If the natural demand does not seem to be appearing in the market, then I think the people who are holding on to those dollars may look to unwind some of those trades.”

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