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Oil Prices Surge; Stocks Gain; US Trade Deficit Shrinks; Homes Sales Up

October 30, 1986

Undated (AP) _ Oil prices spurted upward Thursday as world markets reacted to the unexpected ouster of Shiek Ahmed Zaki Yamani as Saudi Arabia’s oil minister.

There was uncertainty over the impact that Yamani’s departure would have on future efforts by the Organization of Petroleum Exporting Countries to curb crude output to boost world prices.

But reports that Yamani’s replacement, Hisham Nazer, had summoned OPEC’s pricing committee for an emergency session suggested the cartel might redouble efforts to shore up oil prices, analysts said.

Meanwhile, the Commerce Department reported a second straight monthly decline in the nation’s merchandise trade deficit.

The September shortfall slimmed to $12.6 billion from $13.3 in August and Commerce Secretary Malcolm Baldrige said the report was evidence ″that we have turned the corner on the trade deficit.″

The smaller-than-expected deficit helped the dollar to gain against most other major currencies in trading at home and abroad.

The trade news was also welcomed on Wall Street where investors bid stock prices sharply higher in brisk trading. The Dow Jones average of 30 industrials climbed 26.57 to 1,878.37.

Volume on the New York Stock Exchange reached 194.22 million shares, the sixth largest total on record, up from 164.43 million on Wednesday. The busiest trading day ever on the Big Board was Sept. 11 when 237.57 million shares changed hands.

In other developments:

-The Commerce Department saidsales of new homes rose 10.6 percent in September, snapping a string of five consecutive monthly declines. Sales of new single-family houses were sold at a seasonally adjusted annual rate of 690,000 units in September, against a rate of 624,000 units in August.

-The nation’s basic money supply, called M1, rose $6 billion to a seasonally adjusted $702.6 billion in the week ended Oct. 20 from a revised $696.6 billion the previous week. The previous week’s M1 was initially reported as $696.5 billion. M1 includes cash in circulation, deposits in checking accounts and non-bank travelers checks

-The Labor Department said prices of goods imported into the United States rose 0.7 percent from June to September, following declines in the previous two quarters. The report said prices of non-petroleum imports have advanced 10.2 percent since September 1985, a period during which the value of the U.S. dollar against other major currencies has declined by more than 30 percent.

Some analysts speculated that Yamani’s departure would remove a long- respected voice of moderation within the fractious cartel, making future agreements to limit production and raise prices less likely.

But others said that Saudi King Fahd’s move had smoothed the way to better cooperation within the 13-nation cartel and that this would boost chances for higher prices in the future.

At the New York Mercantile Exchange, contracts for December delivery of West Texas Intermediate, the benchmark U.S. grade of crude oil, jumped $1.31 a barrel to close at $15.04.

Prices for November delivery of refined products also rose significantly. Heating oil closed at 39.57 cents a gallon, up 2.8 cents, while unleaded gasoline rose to 40 cents a gallon, up 2.15 cents.

Details of the government trade report showed imports fell 2.7 percent to $30.1 billion in September, while exports dipped 0.5 percent to $17.5 billion.

Economists claim a weaker dollar will eventually lead to real improvements in the county’s trade balance by making imported goods more expensive at home and U.S. goods less costly abroad.

For the first nine months of 1986, the United States amassed a trade deficit of $127.8 billion, compared with a $106.6 billion shortfall for the same period in 1985.

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