Oil, energy shares rally, boosting stock markets

NEW YORK (Reuters) - Brent crude oil prices hit a four-month high and energy equities rose on Tuesday after reports of an agreement between two major producers to freeze output, leading U.S. equities higher.

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Crude prices are up more than 10 percent in the last three sessions, lifted on Tuesday after Russia’s Interfax news agency quoted a diplomatic source in Doha, Qatar, saying Russia and Saudi Arabia reached consensus about an oil output freeze ahead of a producers’ meeting there on April 17.

“The market appears to be taking a lot of support from positive statements. But, this isn’t the first time the Russians have come out and made remarks related to a production freeze being imminent,” said Gene McGillian, a senior analyst at Tradition Energy.

Brent crude LCOc1 rose 3.3 percent to $44.22 a barrel and U.S. crude CLc1 settled up 4.5 percent at $42.17.

On Wall Street, energy sector shares led the market, and the S&P 500 hit an intraday high shortly after the headlines on the output freeze.

The Dow Jones industrial average .DJI rose 164.84 points, or 0.94 percent, to 17,721.25, the S&P 500 .SPX gained 19.73 points, or 0.97 percent, to 2,061.72 and the Nasdaq Composite .IXIC added 38.69 points, or 0.8 percent, to 4,872.09.

The S&P 500 energy sector .SPNY gained 2.8 percent.

The FTSEurofirst index of 300 major European companies .FTEU3 rose 0.6 percent, led by energy names. MSCI's gauge of stocks across the globe .MIWD00000PUS added 0.6 percent, its fourth gain in the past five sessions.

Earlier, Japanese shares .N225 rose 1.1 percent after a rally in the yen against the dollar JPY= stalled, lifting shares of exporters.

The U.S. dollar strengthened against the euro EUR= for only the third session in the last 12. The dollar index .DXY ticked up 0.1 percent.

The dollar has been weak of late as investors have pulled back from riskier assets and closed out trades that involved borrowing in low-yielding yen to buy assets in the U.S. and other markets.

Currencies of commodity-based economies like Canada also rose. Against the greenback, the loonie CAD= hit its strongest level in nine months.

“Oil is now more than 50 percent stronger than it was at its low in February. That’s boosting general sentiment overall and with that we’re seeing a rally in commodity currencies such as the Canadian dollar,” said John Doyle, director of markets at Tempus Consulting in Washington.

U.S. Treasury yields rose as higher oil and global stock market gains reduced the safe-haven appeal of U.S. government debt.

Benchmark 10-year Treasury notes US10YT=RR fell 11/32 in price to yield 1.777 percent from 1.724 percent late on Monday.

Reporting by Rodrigo Campos, additional repoting by Gertrude Chavez-Dreyfuss; Editing by Nick Zieminski and Dan Grebler