Crude oil moves higher as investors look ahead to central bank meetings

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Crude oil moved higher on Monday, boosting energy stocks, but gains in US equity markets were capped as investors looked ahead to a busy week of central bank meetings to set interest rates around the world.

Brent crude added 0.7 per cent to $94.61 a barrel on Monday, close to its highest level since November 2022. The US equivalent, West Texas Intermediate, rose 1.2 per cent to $91.96 a barrel as traders continued to price oil higher following news earlier this month that Saudi Arabia and Russia, two of the world’s largest producers, planned to extend their voluntary production and export cuts.

Rising prices lifted the shares of ExxonMobil and ConocoPhillips, both up 1.2 per cent. The heavyweight sector also pushed up the S&P 500 by 0.3 per cent in New York. The tech-focused Nasdaq Composite added 0.3 per cent.

However European and Asian markets posted declines, with the region-wide Stoxx Europe 600 ending the day 1.1 per cent lower and Hong Kong’s Hang Seng index falling 1.4 per cent.

The moves came as traders prepared for interest rate decisions from three of the world’s largest central banks this week. In the US, the Federal Reserve is expected to keep its target range unchanged at between 5.25 per cent and 5.5 per cent. 

“Further rate hikes would risk sending the economy into a hard-landing scenario,” said Thomas Simons, senior US economist at Jefferies. “Instead, the Fed can look to a strategy of maintaining current policy rates for a long time.”

Yields on interest rate-sensitive two-year US Treasuries added 0.02 percentage points to 5.06 per cent, while yields on 10-year notes were flat at 4.33 per cent. Bond yields rise when prices fall.

The Bank of England, which is also due to hold a rate-setting meeting this week, is forecast to increase its benchmark bank rate by a quarter of a percentage point to 5.5 per cent, while the Bank of Japan is expected to keep rates unchanged at minus 0.1 per cent.

Line chart of share price, rebased (%) showing SocGen shares slumped after it announced lower profit targets

The Euro Stoxx 600 bank index dropped 1.7 per cent as investors took a dim view of the strategic plan announced by new Société Générale’s chief executive Slawomir Krupa, which included cuts to profitability targets. Shares in the French bank slid 12.1 per cent, leading fallers on France’s Cac 40 index, which finished down 1.5 per cent.

Investors remained wary of a downturn in the chip sector after Taiwan’s TSMC — the world’s biggest contract chipmaker — told its main suppliers last week to delay delivery of high-end chipmaking equipment.

TSMC, which lost 3.2 per cent on Monday, has been warning that the recent boom in artificial intelligence technology is struggling to compensate for broader economic headwinds and China’s stalled recovery.

UK chip designer Arm lost 7.4 per cent, after last week completing the largest initial public offering on Wall Street in almost two years.

In Europe, the Oslo-listed Nordic Semiconductor shed 9.9 per cent after cutting its revenue guidance for the third quarter. Shares of Dutch chipmaker ASML fell 0.8 per cent and BE Semiconductor lost 4 per cent. South Korea’s SK Hynix declined 2.8 per cent.

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