European stocks rise as oil prices fall again
European stock markets rose yesterday, a day after suffering sharp falls, as traders digested mixed economic data before the outcome of the Fed’s monetary policy meeting. Meanwhile global oil prices fell yesterday, with New York crude hitting the lowest level since July, as surging US crude stocks and weak European economic data sparked fresh demand concerns, analysts said.
London’s FTSE 100 index of top companies gained 0.12 per cent to 5,804.78 points at the close, Frankfurt’s DAX 30 rose 0.27 per cent to 7,192.85 points, while in Paris the CAC 40 won 0.59 per cent to 3,426.49 points. Madrid’s IBEX 35 index firmed 0.57 per cent to 7,791.50 points.
“The rush of selling appears to have subsided for now, but this may just be a pause in the current bout of risk aversion,” said Chris Beauchamp, analyst at IG trading group.
In foreign exchange trading, the euro fell to $1.2947 from $1.2978 late in New York on Tuesday. Gold prices slipped to $1,706.50 an ounce on the London Bullion Market from $1,711 an ounce on Tuesday. Optimistic forecasts by Boeing and Facebook kept US stocks mostly in the green yesterday.
In midday trading, the Dow Jones Industrial Average was up 0.09 per cent, the broad-based S&P 500 was flat, but the Nasdaq Composite lost 0.19 per cent.
In Berlin, European Central Bank President Mario Draghi defended his euro-crisis strategy in the German Parliament, where his plan to buy bonds of struggling nations has come under fire.
The so-called OMT bond-purchase programme “will not lead to disguised financing of governments” and “will not lead to inflation,” Draghi said.
He added that the ECB expected the eurozone economy “to remain weak in the near term” and warned that “euro area unemployment remains deplorably high.”
With regards to oil prices, New York’s main contract, light sweet crude for December, sank as low as $85.22 – the lowest point since July 12. It later stood at $85.42, which marked a large drop of $1.25 from Tuesday’s closing level.
Brent North Sea crude for delivery in December dropped 68 cents to $107.57 per barrel in late afternoon London deals. The US government’s Department of Energy revealed that American oil inventories soared by 5.9 million barrels to 375 million barrels in the week to October 19.
That was more than three times market expectations for a gain of 1.8 million barrels, according to analysts polled by Dow Newswires.
Rising stockpiles are widely regarded as a key indicator of weak demand in the United States, which is the world’s biggest crude consuming nation.
Adding to negative sentiment was news that German business confidence slumped to a two-and-a-half-year low in October.
“Oil prices initially enjoyed somewhat of a firmer tone today on the better earnings reports out of both the US and Europe, as well as the firmer tone in equity markets today, but crude inventories came out at 5.9 million barrels well above expectations, turning prices lower,” said CMC Markets analyst Michael Hewson.
“The bounce has been more of the dead cat variety given the poor economic data,” he added.