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Canada’s main stock index rose Friday as energy stocks jumped after OPEC agreed a modest increase in output to compensate for losses in production at a time of rising global demand.

The S&P/TSX composite index was up 0.75 per cent, or 122.61 points, to 16,458.58 in early trading

Benchmark Brent crude jumped $2.19 a barrel, or almost 3 per cent, to a high of $75.24 before slipping to around $75. U.S. light crude was $1.80 higher at $67.34.

The Organization of the Petroleum Exporting Countries, meeting in Vienna, agreed on Friday to boost output from July after its de facto leader Saudi Arabia persuaded arch-rival Iran to cooperate in efforts to reduce the crude price and avoid a supply shortage.

Two OPEC sources told Reuters the group agreed that OPEC and its allies led by Russia should increase production by about 1 million barrels per day (bpd), or 1 percent of global supply.

But the real increase will be smaller because several countries that recently underproduced oil will struggle to return to full quotas while other producers will not be allowed to fill the gap.

The deal looked to be in line with many analysts’ forecasts.

Analysts had expected OPEC to announce a real increase in production of 500,000 to 600,000 barrels per day (bpd), which would help ease tightness in the oil market without creating a glut.

“The effective increase in output can easily be absorbed by the market,” Harry Tchilinguirian, head of oil strategy at French bank BNP Paribas told Reuters Global Oil Forum.

Oil prices have been on a roller-coaster ride over the last few years, with the international marker, Brent, trading above $100 a barrel for several years until 2014, dropping to almost $26 in 2016 and then recovering to over $80 last month.

U.S. stocks opened higher on Friday with the Dow ending its 8-day losing streak as bank stocks gained after passing the Federal Reserve’s annual regulatory stress test.

The Dow Jones Industrial Average rose 65.27 points, or 0.27 per cent, at the open to 24,526.97.

The S&P 500 opened higher by 11.03 points, or 0.40 per cent, at 2,760.79. The Nasdaq Composite gained 26.74 points, or 0.35 per cent, to 7,739.69 at the opening bell.

The MSCI All-Country World index, which tracks stocks in 47 countries, was up 0.3 per cent by afternoon in Europe but down 1.3 per cent on the week, its worst weekly performance since the week ended March 23.

Investor nervousness over a possible full-blown trade war has deepened this week over increasingly sharp rhetoric between the United States and China, and growing evidence of the economic damage such a conflict could produce.

Chinese state media said on Friday that U.S. protectionism was self-defeating and a “symptom of paranoid delusions” that must not distract China from its path to modernisation.

Earlier this week, German carmaker Daimler cut its earnings forecast, saying tariffs on cars exported from the United States to China would hurt Mercedes-Benz sales.

India joined the European Union and China in retaliating against U.S. President Trump’s tariffs on steel and aluminum, raising import duties on U.S. almonds by 20 per cent.

“With no negotiations in sight at the moment, our base case (scenario) is shifting to a further escalation of the trade conflict between the two countries,” wrote analysts at Danske Bank in a note to clients.

There is a risk of a further deterioration in relations on June 30, when Washington is due to announce a plan to restrict Chinese investments into the United States and limit exports of U.S. tech products to China, they added.

Strong financial stocks and better-than-expected euro zone purchasing managers index for services helped drive a timid relief bounce in European shares. But the pan-European STOXX 600 and its euro zone counterpart were set for their biggest weekly loss in three months as the consequences of rising protectionism sank in, notably for the autos sector.

The strong PMIs also boosted the euro. It was last up 0.4 on the day and was set to end the week higher by half a percent. Against a basket of currencies, the dollar was 0.2 per cent lower.

Against the yen, the greenback gained 0.2 per cent. It was modestly higher at 110.16 yen, below a one-week high of 110.76 scaled the previous day amid lingering concerns over the U.S.-China trade dispute.

“The potential for all-out trade war, European political risks and emerging market volatility remain potent factors that should contain dollar/yen within the current range, though the lack of downside over the last week or so suggests stronger underlying demand,” wrote Robert Rennie, head of market strategy at Westpac.

The European PMIs also showed manufacturing growth was the weakest in 18 months on trade worries.

Elsewhere in Europe, Greece’s borrowing costs fell to four-week lows on Friday after Athens won debt relief from the euro zone. Italian bond yields also fell after a top lawmaker said an exit from the euro was not part of the current government’s plans.

Sterling was 0.3 per cent higher against the dollar, extending gains made the previous day after the Bank of England’s chief economist Andy Haldane unexpectedly joined the minority of policymakers calling for a UK interest rate hike, citing concerns about growing wage pressure.

Earlier in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan dropped as much as 0.35 per cent at one point to touch its weakest since early December, before erasing losses to be up 0.15 per cent. Still it was 2.3 per cent off for the week.

Hong Kong’s Hang Seng plumbed six-month lows, having lost 3.9 per cent so far this week. South Korea’s KOSPI hit nine-month lows and in mainland China, the CSI300 index lost almost 5 per cent this week to one-year lows.

Japan’s Nikkei gave up 0.8 per cent for a weekly loss of 1.7 per cent.

Reuters

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