Falling US oil stockpiles and optimism over Opec’s (Organization of the Petroleum Exporting Countries) plan to cut production sent Brent crude prices 4.4% higher for the week. This lifted riskier emerging markets (EMs), with the MSCI Emerging Markets index gaining 0.8%. EMs also shrugged off the 1.3% gain in the US dollar. Gold, however, fell 4% below US$1,300 per oz because of a stronger greenback, the shift out of safe haven assets and the looming US interest rate hike.

Top performing equity funds were those invested in Brazilian equities. Boosted by oil’s rally, the country’s benchmark Ibovespa Index closed up 3.7% for the week at 13-month highs. The Brazil-focused $300 million JPM Brazil Equity A (acc) USD fund rose 6%, while two Latin America equity funds that have about 60% of assets invested in Brazil funds also gained. They were the $2 billion BGF Latin American A2 fund, up 5.7%; and the $320 million Schroder ISF Latin Amer A1 USD fund, up 5%.

“We see less risk of a renewed oil price plunge and the potential for a gradual rise towards longterm equilibrium levels around US$60 per barrel, where supply and demand are likely to find a better balance. A spike beyond that level is unlikely as some sidelined oil producers would then have incentive to ramp up production,” says Richard Turnill, BlackRock’s global chief investment strategist, in an Oct 10 report.

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