A string of reversals from sharp moves the previous day marked global financial market trading on Wednesday, with stocks and oil gaining ground and the US dollar falling after its biggest rally in two years.

In early European trading, the dollar was down around a third of one per cent against a basket of currencies, after jumping 1.3 per cent on Tuesday, its biggest rise since July 2013.

Crude oil, equities

Brent crude and WTI oil futures were up 1 per cent, while the major European stock markets gained as much as 0.5 per cent and US futures pointed to a higher open on Wall Street following Tuesday’s 1 per cent slide, its biggest fall in three weeks.

There are no major US or European economic data due on Wednesday, leaving traders to ruminate on the timing of the first US interest rate hike and the latest twists in the Greek debt talks saga.

“The dollar had a strong rebound (on Tuesday) on the back of slightly better than expected US durable goods and consumer confidence data, but that rebound has been short-lived,’’ said Angus Campbell, senior analyst at FXpro in London.

Greece debt repayment

Greece and its European creditors have played down fears that Athens would default on a payment to the International Monetary Fund next week. Greece could avoid the June 5 payment without defaulting if it lumps together all IMF repayments due in June and pays them at the end of the month.

Currency analysts at SocGen said on Wednesday “has the feel of an in-between day’’.

At 0800 GMT, the euro was back above $1.09, up 0.4 per cent on the day, while the dollar was down slightly against the yen dipping below 123.00 yen, having scaled that level on Tuesday for the first time in almost eight years.

The FTSEuroFirst 300 leading index of 300 top European shares was up a third of one per cent at 1607 points and Britain’s FTSE was up 0.4 per cent at 6975 points.

Germany’s DAX was flat and France's CAC was up 0.1 per cent.

Energy shares were in demand across the continent, with the STOXX Europe 600 oil and gas index rising 0.4 per cent as oil prices rebounded on expectations that US crude stocks could fall for a fourth straight week.

Asian shares took their cue from Wall Street’s weakness on Tuesday, and the MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.8 per cent. Shares in Australia dropped 0.8 per cent, South Korea fell 1.7 per cent and Hong Kong eased 0.6 per cent.

But Tokyo’s Nikkei, supported by the yen’s fall to an 8-year low this week, bucked the trend and rose 0.2 per cent.

US normalisation

In bond markets, the 10-year German Bund yield was flat at 0.555 per cent, while the comparable Spanish yield was down 3 basis points at 1.82 per cent, having shot up the previous day on political concerns.

Voters in Spain punished the ruling Popular Party in local elections over the week-end after years of austerity policies.

The 10-year US Treasury yield was up a basis point at 2.14 per cent, and the two-year yield up four basis points at 0.65 per cent.

Indicators had on Tuesday showed that US business spending plans increased, consumer confidence improved and house prices extended gains. The data supported the stance taken by Federal Reserve Chair Janet Yellen who had said on Friday the central bank could hike rates this year if the economy keeps improving.

“Conditions have normalised considerably in recent years. As Yellen noted, if this process of normalisation continues, then monetary policy is likely to normalise correspondingly,’’ said Goldman economist David Mericle.

Commodities took heart from the dollar’s weakness on Wednesday.

After tumbling nearly 3 per cent on Tuesday, US crude was up 1 per cent at $58.65 a barrel, while Brent gained 0.9 per cent to $64.27 a barrel.

Gold edged up from Tuesday’s two-week low to trade at $1,189 an ounce.

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