By Riva Gold
Global stocks were on track to end a strong month with gains on Wednesday as oil prices surged on hopes major producers would reach a deal to cut production.
The Stoxx Europe 600 was up 0.4% midday, led by the energy sector, while futures pointed to a 0.3% opening gain for the S&P 500.
Investors were focused on a meeting of the Organization of the Petroleum Exporting Countries. Brent crude oil rocketed in choppy morning trading, with the February contract last up 8.3% at $51.22 barrel.
Oil prices have whipsawed in recent sessions on hopes OPEC would come to an agreement later Wednesday to curb output amid a global glut of supply. Prices rose sharply after Iran's oil minister said he believed the cartel would reach a deal, but that an immediate freeze of his country's output wasn't on the agenda.
The moves helped Europe's oil and gas sector rise 2.6%, while in U.S. premarket trading, Hess Corp. rose 9.1% and Marathon Oil Corp. rose 5.4%.
Mining companies posted losses, however, as metals prices retreated, keeping wider stock-market gains in check.
Steel and iron-ore prices in China had fallen sharply in Asian trading after exchanges there lowered the daily trading limit and raised margin requirements in an effort to curb speculation. The recent rally in metal prices was largely driven by Chinese investors on hopes that demand would pick up in China and the U.S., analysts said.
Meanwhile, U.K. bank shares were in focus after Royal Bank of Scotland Group, Barclays and Standard Chartered all stumbled in Bank of England stress tests, but the central bank said only RBS needed to act quickly to bolster its capital. Shares of RBS fell 2.6%, while Standard Chartered and Barclays reversed early losses to post modest gains.
The Bank of England said the financial system had held up well since the June referendum, but the outlook for financial stability remained challenging.
In government bond markets, the yield on 10-year German government bonds recovered after falling to as low as 0.194% when European Central Bank President Mario Draghi said officials could decide to change the size of their monthly bond purchases at next week's meeting.
"We can deliver the appropriate [policy] stance by different combinations of instruments, for instance the amount of monthly [bond] purchases or the length of time over which they take place," he said in an interview on the central bank's website.
Data Wednesday showed the eurozone's annual rate of inflation rose to its highest level since early 2014, but remained well below the ECB's target.
10-year U.S. Treasury yields rose to 2.359% from 2.305% on Tuesday. While the ECB continues to ease policy, the Federal Reserve is widely expected to raise interest rates at its December meeting.
Federal Reserve Gov. Jerome Powell said on Tuesday that the case for raising rates had strengthened since the central bank's last meeting, with the economy "growing at a healthy pace, with solid payroll job gains, and inflation gradually moving up to 2%."
Those expectations have also strengthened the dollar, which was last up 1% against the yen and 0.1% against the euro.
Commodity-sensitive currencies jumped against the dollar, however, as oil rose, with Russia's ruble up 1.7% against the dollar and the Canadian dollar up 0.4%.
Earlier, markets in Asia were mixed, as the steep drop in metals prices offset a higher closeon Wall Street.
Japan's Nikkei Stock Average was flat but ended the month over 5% higher than it started, bolstered by a steady strengthening of the dollar against the yen.
Wall Street is also on track for its best month since March, with the S&P 500 set to gain nearly 4% in November. Investors have plowed into U.S. bank shares, health care companies, and small-caps on expectations for reduced regulation and higher growth in the U.S.
"There's still a runway for upside given you still have a lot of positive things going on--you have home prices increasing, consumer net worth increasing dramatically, low unemployment, and signs of wage growth," said Lowell Yura, portfolio manager at BMO Global Asset Management.
"A strong dollar and strong growth could be very positive for U.S. equities," he said.
European stocks were on track to gain nearly 1% this month despite a fall in the euro, held back by continuing jitters about the political climate.
Italy's FTSE MIB Index rose 1.2% on Wednesday, but remained down 22% this year amid concerns about weak growth, fractious banks and Sunday's referendum on constitutional reform.
If there is a "no" vote that is followed by a period of political uncertainty and market turmoil, the Italian banking system could come under further pressure, according to Maria Paola Toschi, an Italy-based market strategist at J.P. Morgan Asset Management.
In the event of a political impasse, efforts to deal with nonperforming loans at troubled lenders could stall, while some banks' efforts to recapitalize could become more challenging if foreign investors lose confidence in Italy, she said.
Still, Italian bonds and equities have already come under significant pressure, and the European Central Bank could cushion the blow, she said, softening the impact of the referendum on markets.
Biman Mukherji, Margot Patrick,Shayndi Raice and Jenny W. Hsu contributed to this article
Write to Riva Gold at email@example.com
(END) Dow Jones Newswires
November 30, 2016 08:29 ET (13:29 GMT)
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