TOKYO, Oct 3 (Portal) – Oil rose on Monday as OPEC+ considered cutting production at their meeting later this week, while sterling surged higher after the UK government announced it would reverse a controversial tax cut make that had upset the UK markets.
Asian stocks fell mostly in holiday-related trading, although Japanese markets found support from strong energy and semiconductor stocks.
Sterling was higher in early London trade after the UK government announced plans to reverse a proposed abolition of the higher income tax rate, which has sparked a backlash within the ruling Conservative Party.
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The pound rose to $1.128, a 10-day high, while FTSE futures pointed to a strong rebound in a stock market battered by concerns over spending plans by Prime Minister Liz Truss and her Finance Minister Kwasi Kwarteng.
“From a market perspective, this is a good step in the right direction. It will take time for markets to accept the message, but it should ease the pressure,” said Jan von Gerich, chief analyst at Nordea.
“Questions remain and sterling is likely to remain under pressure.”
Outside of Japan, stocks fell across Asia. MSCI’s broadest index of Asia-Pacific ex-Japan stocks (.MIAPJ0000PUS) slipped 1.04% and was on course for its fourth straight session of losses. It fell nearly 14% over the past quarter.
US crude futures rose 2.70% to $81.64 a barrel after OPEC+ sources told Portal oil production could be cut by 500,000 to 1 million barrels a day. Brent crude rose 2.55% to $87.31 a barrel.
Japan’s Nikkei 225 (.N225) was up 0.50%, with energy stocks leading the index and positive quarterly earnings from Mimasu Semiconductor (8155.T) boosting chip stocks.
Minutes from the Bank of Japan’s September meeting were also released on Monday, showing members discussing the possibility of inflation topping expectations amid the bank’s ultra-loose monetary policy, which ultimately remained unchanged.
“Some participants suggested that the BoJ should closely monitor whether recent cost pressures will lead to a virtuous cycle of higher wages,” wrote Ayako Fujita, a researcher at JPMorgan, in a note. “We believe this has confirmed that wage trends are the key condition for the BoJ to change policy.”
The yen briefly fell as low as 145.4 against the US dollar, despite comments by Japanese Finance Minister Shunichi Suzuki this morning that the government would take “decisive steps” to prevent sharp currency moves.
It was the first time the yen broke through 145 since September 22, when the Treasury Department intervened to prop up the currency, which hit a 24-year low against the dollar this year. It later pared losses and last traded at 144.86.
In Australia, where some states are celebrating a public holiday, the S&P/ASX 200 index (.AXJO) fell 0.27%.
Hong Kong’s Hang Seng Index (.HSI) fell 1.75%.
South Korea had a national holiday and China entered the Golden Week pause on Monday. Hong Kong is closed on Tuesday for a public holiday.
Euro Stoxx 50 futures lost 1.63%.
Investors’ focus will later shift to the US ISM manufacturing index for September.
“ISM manufacturing is unlikely to dent optimism in the US economy, which has continued to build as positive economic indicators have been released in recent weeks,” Saxo Bank’s market strategist Redmond Wong wrote in a research Grade.
The Reserve Bank of Australia meets on Tuesday, with markets broadly expecting another 50 basis point rate hike, while Japan’s CPI is likely to show a further rise in inflation.
Spot gold rose 0.27% to $1,664.0900 an ounce.
Leading cryptocurrency Bitcoin fell 1.48% to $19,137.
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Reporting by Sam Byford; Additional reporting from London and Asia Markets teams; Editing by Sam Holmes
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