A smaller than expected 0.25% interest rate increase from the Reserve Bank of Australia helped set global equity markets alight at the start of the week as it raised hopes that other central banks would soon pivot to a slower pace of monetary tightening.
Unfortunately, as the week progressed this excitement faded resulting in some of the earlier gains to be given back following a sharp rise in the oil price, the release of US employment data and geopolitical tensions thanks to a number of North Korean missile launches.
The price of a barrel of Brent jumped around 15% to just shy of $100 after OPEC+ (the Organisation of the Petroleum Exporting Countries plus Russia) announced plans to cut production by 2m barrels per day – and of course a higher oil price will inevitably exacerbate the current inflation issue and potentially prolong the monetary tightening cycle.
On a positive note, given many of the OPEC members are currently producing less than their quotas, the headline 2m barrels per day cut, will in reality be nearer 1m barrels.