World stock markets up; fall in inventories lifts oil

Reuters New York | Updated on January 20, 2018


Oil prices climbed to just shy of $50 a barrel on Wednesday after a sharper-than-expected fall in crude inventories, lifting energy shares and world stock markets.

Growing bets on a possible Federal Reserve rate increase as early as in June or July reduced demand for US government debt.

Fed policy minutes

Investors' expectations for higher borrowing costs have risen since last week's minutes from the central bank's April meeting signaled a June increase was on the table. Comments from policymakers and upbeat US economic data in recent days have supported those views.

“What you're seeing is a recognition that this is going to happen and investors are getting more comfortable with it,” said Kurt Brunner, a portfolio manager at Swarthmore Group in Philadelphia. “There's a recognition that economic growth is okay.”

US crude stockpiles

Energy Information Administration data showed US crude stockpiles fell last week as imports dropped and refineries cut output. Brent settled up $1.13 at $49.74, while US crude's settled 94 cents higher at $49.56.

World stocks markets rose for a second straight session, helped by energy shares, including Chevron, up 1.6 per cent, and bank shares, which benefit from higher interest rates.

The Dow Jones industrial average closed up 145.46 points, or 0.82 per cent, to 17,851.51, the S&P 500 gained 14.48 points, or 0.7 per cent, to 2,090.54 and the Nasdaq Composite added 33.84 points, or 0.7 per cent, to 4,894.89.

Combining Tuesday and Wednesday's performances, the S&P 500 gained 2 per cent, its strongest two-day run since early March.

MSCI's all-country world stock index rose 0.9 per cent, while the pan-European FTSEurofirst 300 index of leading regional stocks ended up 1.3 per cent, touching its highest level since late April.

Greece debt deal

Banks in Europe were buoyed after a new debt deal for Greece seemed to head off the risk of another round of uncertainty over its finances and even its future in the euro zone.

US Treasury prices fell, with short- and medium-dated yields hitting 10-week highs, helped by the solid advance in Wall Street stocks.

Early in the US session, the two-year yield and five-year yield reached 10-week highs at 0.938 per cent and 1.424 per cent, respectively.

Dollar, euro

The US dollar fell from near a 10-week high against the euro and rose just slightly against the yen as investors took profits on the greenback's recent gains.

The euro was last up 0.17 per cent against the dollar at $1.1161, while the dollar was last up just 0.11 per cent against the yen at 110.10 yen.

Yellen's speech

Investors await Fed Chair Janet Yellen's appearance at a panel at Harvard University on Friday, the same day as they take in a revised estimate of US first-quarter growth.

Gold dropped to a seven-week low amid the Fed expectations. Spot gold was down 0.2 per cent at $1,223.93 an ounce, off an earlier low of $1,217.25, the lowest since April 6.

Published on May 26, 2016

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