Thursday September 29th

29-09-2016

OPEC enthusiasm set to wane on Wall Street; PepsiCo rises after earnings

U.S. stock index futures signaled a lower start to trade on Wall Street on Thursday, as European and some Asian shares rose after an accord was struck among OPEC members was struck. The 14-country OPEC oil cartel agreed to seek a cut in crude production when they meet formally in November — paving the way for the first cut in oil supply since 2008. The consequent rally in oil prices saw U.S. stock indexes close higher on Wednesday, with the Dow up triple digits. Crude oil futures rose nearly 6 percent on Wednesday on news of the deal, but pared some gains on Thursday as investors grew skeptical about the details of the agreement and how it will be enforced. "There are the usual unanswered questions about implementation, not least regarding how the output cuts will be divvied up among members; how Iran, Nigeria and Libya might be given greater leeway to increase production without jeopardizing the deal as a whole; and how non-members such as Russia, Mexico, North American shale producers and others will respond," Emily Nicol, economist at Daiwa Capital Markets, said in a note on Thursday. Global benchmark Brent crude oil was down 33 cents a barrel at $48.36 by 8:27 a.m. ET, after earlier climbing to a high of $49.09, its strongest since Sept. 9. Brent settled up $2.72 a barrel, or 5.9 percent, on Wednesday. U.S. light crude oil was down 10 cents at $46.95 a barrel, after earlier hitting $47.47, its highest since Sept. 8. WTI rose $2.38, or 5.3 percent, on Wednesday. On the earnings front, Costco is set to post results after Wall Street closes. PepsiCo shares rose more than 3 percent in the premarket after reporting better-than-expected quarterly sales. ConAgra also posted results, and its stock rose 2 percent. Accenture shares also rose after the firm posted results. Stocks to watch on Thursday include Wal-Mart, which is in talks to buy a stake in Indian online retailer Flipkart, according to media reports. Meanwhile, Apple shares fell more than half a percent in premarket trading after Barclays removed its "Top Pick" designation from the tech giant's stock and lowered its price target to $114 from $115. "Our research indicates a recovery in global smartphone growth could be pushed out. Plus, conversations with industry participants suggest iPhone sales trends could be at risk of petering out in coming months, similar to last year's post-IP6S launch fall-out," Barclays analysts said. Data-wise, there will be the third estimate of U.S. second-quarter gross domestic product (GDP), international goods trade figures for August and pending home sales for the month. There will also be U.S. weekly initial jobless claims. U.S. Federal Reserve Chair Janet Yellen will speak in Kansas City at 4 p.m. ET at a forum on banking and the economy. Before that, Fed Governor Jerome Powell will speak in St. Louis about trends in community bank performance. Most Asian markets closed higher on Thursday after an oil-price rally amid reports of potential production cuts, but India's shares dropped after reports that the Indian army conducted strikes against militants in the disputed region of Kashmir. In Japan, the Nikkei 225 rallied 228.31 points, or 1.39 percent, to 16,693.71, while the Topix index was up 12.48 points, or 0.94 percent, at 1,343.25. Across the Korean Strait, the Kospi advanced 15.66 points, or 0.76 percent, to 2,068.72. Hong Kong's Hang Seng index traded nearly flat at 23,638.77 in late-afternoon trading, after erasing most of its earlier gains. Mainland Chinese markets were higher, with the Shanghai composite closing up 10.37 points, or 0.35 percent, at 2,998.23, and the Shenzhen composite adding 7.62 points, or 0.38 percent, to 1,985.92. Gold traded flat on Thursday, with earlier gains arrested by skepticism over whether OPEC members would be able to implement production cuts that could fuel inflation. Spot gold was barely changed at $1,321.40 an ounce by 1000 GMT, having touched an overnight high of $1,325.80. U.S. gold futures were up nearly 0.1 percent at $1,324.80.