Thursday 17:30 BST. An initial Opec-fuelled jump in risk appetite showed signs of fading by the end of the European session, with developed market equity indices struggling for traction, “core” government bonds trimming early losses and emerging market currencies losing ground.

Crude prices managed to extend the strong gains recorded late on Wednesday after the oil cartel caught the markets off guard by unveiling a tentative agreement to cut production for the first time in eight years.

However, the oil markets were extremely volatile, given a backdrop of scepticism about the deal in some quarters and the lack of details about how the output cut would be split among Opec members.

“Any further upside [for crude] will be a function of the scale and magnitude of supply cutbacks, which won’t be known until the November 30 Opec meeting,” said Chris Turner, head of FX strategy at ING.

“Either way, we wouldn’t rule out a possible setback and prefer to view the Opec announcement as placing a near-term floor on oil prices, rather than a more sustained boost.”

Brent was up 1.8 per cent at $49.57 a barrel, having earlier dipped as much as 1.4 per cent to $47.99. On Wednesday, the international crude benchmark ended 5.3 per cent higher. US West Texas Intermediate was up 2.2 per cent on Thursday at $48.06.

Those moves drove a 4.6 per cent jump for European energy stocks, although the Stoxx 600 equity index overall pared an early 1.1 per cent rise to close just a fraction firmer. The Xetra Dax in Germany shed 0.3 per cent although the more commodity-focused FTSE 100 in London rose 1 per cent.

Deutsche Bank, the chief focus in European stock markets earlier in the week, advanced another 1 per cent in Frankfurt, while its US listed ADR plunged 7 per cent on a report that hedge funds were pulling their money from the bank.

In New York, the S&P 500 was down 0.5 per cent at 2,159.77 early afternoon, with the energy sector shedding early strength after Wednesday’s 4.3 per cent advance.

But Japanese stocks had a strong session, with the Nikkei 225 climbing 1.4 per cent, as the yen — viewed by many as among the safest of “haven” currencies — sank in response to the jump in oil prices and early improvement in risk sentiment.

Furthermore, said Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi UFJ, “a higher oil price, if sustained, would lead to a deterioration in Japan’s terms of trade and narrowing of their trade surplus, reducing support for the yen.

“And if the price of crude oil was to rebound more materially it would help to lift inflation expectations in Japan and weaken the yen. However in light of our outlook for only a modest further rebound in the price oil, we do not believe that it justifies dovish shift in our outlook for the yen.”

The dollar was up 0.8 per cent against the Japanese currency at ¥101.47, but off a one-week intraday high of ¥101.84. The euro was up 1.1 per cent versus the yen at ¥114.10 — and was also 0.3 per cent firmer versus the dollar $1.1244.

Sentiment towards the yen was not helped by a weak set of Japanese retail sales data for August.

Meanwhile, some so-called “oil currencies” extended the strong gains seen in the aftermath of the Opec announcement.

The US currency was down another 0.4 per cent against the Norwegian krone, 0.2 per cent versus the Russian rouble and 0.3 per cent against the Malaysian ringgit, although it inched up 0.1 per cent against the Canadian dollar.

But emerging market currencies more broadly lost ground, with the dollar up 0.3 per cent against the Brazilian real, 0.5 per cent versus the Turkish lira and 1.9 per cent against the South African rand.

Meanwhile, “sovereign bond markets have been put on the defensive, to varying degrees, on concerns that any firming of oil prices will lead to higher inflationary pressures,” said Anthony Karydakis, chief economic strategist at Miller Tabak.

The yield on the 10-year US Treasury, which moves inversely to the security’s price, briefly pushed above 1.60 per cent before easing back to 1.58 per cent, up just 1 basis point on the day, as risk appetite faltered.

The yield on the 10-year German Bund rose 3bp to minus 0.12 per cent while that on the 10-year UK gilt added 4bp to 0.72 per cent.

Gold retreated for the third day in a row, with a $2 drop to $1,319 an ounce leaving the metal at its lowest for more than a week.

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