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GLOBAL MARKETS-Oil rebound hauls up stocks, commodity currencies

Published 19/09/2016, 09:06 pm
© Reuters. GLOBAL MARKETS-Oil rebound hauls up stocks, commodity currencies
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* Crude prices rise on hints of output deal

* Energy company shares lift global indices

* Wall Street set to open higher

* U.S. dollar broadly weaker ahead of Fed meeting

By John Geddie

LONDON, Sept 19 (Reuters) - Oil prices bounced back from multi-week lows on Monday, hauling up world stock markets and commodity-linked currencies, on hints that producers were close to reaching an output deal.

Crude prices rose more than 1 percent, with U.S. futures CLc1 bouncing off Friday's one-month low to $43.63 and Brent climbing LCOc1 from a two-week trough to $46.30 after Venezuela said producers could announce a deal this month. O/R

A firmer oil price bolstered energy company shares in bourses around the world, allowing European stocks to climb after two straight weeks of losses .STOXX . Wall Street was set to open up around 0.5 percent ESc1 .

It also helped lift commodity-linked currencies including the Canadian CAD= , Australian AUD=D4 and New Zealand dollars NZD=D4 by around half a percent, while the U.S. dollar was broadly weaker.

Against a basket of other currencies, the greenback lost 0.2 percent to 95.894 .DXY , giving up some of Friday's gains which were the biggest in a single day since late June. FRX/

"It is not the first time this year we have had hopes of a deal and they have been dashed, but for now the oil rebound is supporting certain markets," said Frederik Ducrozet, a senior economist at Pictet.

The pan-European 600 index which had fallen to a six-week low on Friday, rose 0.7 percent, with the STOXX Europe 600 Oil & Gas index .SXEP advancing 0.8 percent. .EU

Emerging market shares .MSCIEF hit a one-week high, with Hungary as the standout performer after a ratings promotion to investment grade saw the Budapest share index jump to a nine-year high. EMRG/FRX

Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 1.2 percent in a move that was largely attributed to bets that the U.S. Federal Reserve would skip a chance to raise rates at a policy meeting this week. .SSEC put on 0.5 percent, while Taiwan .TWII jumped 2.8 percent after a string of losses. Liquidity was lacking, with Tokyo closed for a holiday.

A surprisingly large rise in U.S. consumer price inflation reported on Friday seemed to add to the case for a hike and pushed the dollar higher.

Yet most recent consumer and industrial activity data has disappointed, leaving the market still pricing in only a 12 percent 0#FF: probability of a rate rise this week, and 45 percent for December.

Assuming no move on policy, the focus will be on the FOMC's forecasts for the funds rate, which this time extend to 2019.

"They may use the extension to lower their expectations for rates in 2017 and 2018, so that they end up with the same terminal level of rates, but just take longer to get there,"

said Marshall Gittler, head of investment research at FXPRIMUS.

"In other words, a slower, more gradual pace of tightening. In that case, I would expect the dollar to weaken."

There was little discernible market reaction to bombings in New York City and New Jersey and a stabbing at a Minnesota shopping mall.

The Bank of Japan also meets this week and could well go in the opposite direction by easing policy, though conflicting reports on what it might do have stoked much uncertainty.

Sources have said the BoJ will consider making negative interest rates the centerpiece of future easing by shifting its prime policy target away from base money. steps that markets consider to be less than aggressive would be likely to see the yen push higher and pressure the Nikkei .N225 .

For Reuters new Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets

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