San Francisco Frontiers - Oil jumps but dollar bruised on US data

Investors have on edge over worries that rising interest rates, aimed at fighting sky-high inflation, could spark recessions.

With a key business survey flagging a slowing of the US economy, the dollar and US government bond yields moved lower as the US Federal Reserve may not need to raise interest rates as much as markets have feared to get a grip on inflation.

The Institute for Supply Management said its manufacturing index dropped 1.9 points to 50.9 percent, well below expectations and just barely above the 50-percent threshold indicating expansion.

That was the weakest pace in more than two years, and new orders fell by four percent.

Fed officials have indicated that the central bank will continue raising interest rates until inflation begins to drop, even if that means the US economy enters recession.

A slowdown means that a peak in interest rates may be close, and helped Wall Street stocks add to gains, with the Dow jumping 2.4 percent in late morning trade.

European stock indices moved higher following the US data, with Frankfurt's DAX index ending the day 0.8 percent higher, the Paris CAC climbing 0.6 percent and London's FTSE 100 adding 0.2 percent.

- Oil spikes before OPEC -

Oil prices leapt by more than five percent at one point as reports said OPEC and its allies are considering a major output cut to stem a price plunge caused by demand worries.

That stoked stubborn concerns about soaring inflation, which has been fuelled this year by sky-high energy prices after key producer Russia's invasion of Ukraine.

"Any cut will no doubt frustrate consuming countries that are on the verge of recession after spending a year dealing with soaring energy costs on the back of the post-pandemic recovery and war in Ukraine," said OANDA analyst Craig Erlam.

The 13 members of the Organization of the Petroleum Exporting Countries (OPEC), led by Riyadh, and their 10 partners led by Moscow will physically meet on Wednesday for the first time since March 2020.

- Sterling gains on U-turn -

The British pound bounded above $1.13 following the latest US data, and after the UK government scrapped plans to axe its top income tax rate in the wake of finance minister Kwasi Kwarteng's debt-fuelled mini budget which helped send sterling spiralling to a record dollar low of $1.0350 one week ago.

UK gilts, or government bonds, remain supported by an emergency Bank of England intervention after yields had rocketed following the mini budget announcement.

- 'Dicey' sentiment -

Shares in Credit Suisse plunged to a new low in Zurich on Monday as the scandal-plagued lender sought to ease concerns about its financial health.

Its stock tumbled 11.6 percent to 3.58 Swiss francs ($3.61) before clawing back most of the ground, ending the day with a drop of 0.9 percent at 3.94 francs.

The Financial Times reported that senior executives sought over the weekend to reassure big clients and investors about the bank's liquidity and capital position due to concerns raised about its financial strength.

"Sentiment is still pretty dicey and Credit Suisse is definitely weighing heavily today on European equities," Markets.com analyst Neil Wilson told AFP.

"A globally systemic bank requiring to raise capital would be a major event and could certainly undermine confidence in the banking system."

Asian equities mainly fell Monday, with Hong Kong tumbling to its lowest point in more than a decade as fears for China's economy deepens this year's investor rout.

- Key figures around 1530 GMT -

New York - Dow: UP 2.4 percent at 29,399.70 points

EURO STOXX 50: UP 0.7 percent at 3,342.17

London - FTSE 100: UP 0.2 percent at 6,908.76 (close)

Frankfurt - DAX: UP 0.8 percent at 12,209.48 (close)

Paris - CAC 40: UP 0.6 percent at 5,794.15 (close)

Tokyo - Nikkei 225: UP 1.1 percent at 26,215.79 (close)

Hong Kong - Hang Seng Index: DOWN 0.8 percent at 17,079.51 (close)

Shanghai - Composite: Closed for a holiday

Pound/dollar: UP at $1.1301 from $1.1170 on Friday

Euro/dollar: UP at $0.9834 from $0.9802

Euro/pound: DOWN at 86.91 pence from 87.75 pence

Dollar/yen: DOWN at 144.32 yen from 144.74 yen

Brent North Sea crude: UP 3.8 percent at $88.41 per barrel

West Texas Intermediate: UP 4.3 percent at $82.88 per barrel

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Z.Sanchez--SFF