Crude oil prices pared losses and global equity markets rebounded yesterday as investors snapped up beaten-down energy stocks and wagered the US central bank will express caution in the midst of growing turmoil in capital markets sparked by oil’s collapse.
Russia’s huge emergency rate hike failed to stabilise the ruble’s decline, which jolted markets, and German Bund yields hit a new low as a collapse in Russian financial markets sent investors scurrying for top-rated assets.
Russian stocks on the dollar-denominated RTS index slumped 12.4 per cent, while sovereign and corporate bonds also retreated.
Brent crude trimmed losses to trade just below $60 a barrel after breaking through that level in a plunge of more than four per cent to plumb a July 2009 low.
US oil prices rallied abruptly to trade just above break-even on what traders said was a mix of profit-taking and positioning ahead of options expiry.
“There’s a whole lot of things going on, from the options trade in WTI to the position squaring in Brent, that’s helping oil prices get some upward traction here,” said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow, New York.
European shares staged a late rebound as the ruble recovered much of the day’s losses against the dollar. Traders pointed to comments by US Secretary of State John Kerry, who said Russia had made constructive moves towards possibly reducing tensions in Ukraine.
Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont, said markets will remain volatile, citing unresolved concerns over the ruble’s collapse, Ukraine, Greek elections and declines in the stock markets of oil-producing nations.
The FTSEurofirst 300 index of pan-European shares closed 1.9 per cent higher at 1,315.19, while MSCI’s all-country world index rose 0.6 per cent to 406.04. The Dow Jones industrial average was up 65.48 points, or 0.38 per cent, at 17,246.32. The Standard & Poor’s 500 Index was up 4.62 points, or 0.23 per cent, at 1,994.25. The Nasdaq Composite Index was down 5.81 points, or 0.13 per cent, at 4,599.35.
Brent crude cut more than half its losses. Brent was down $1.16 at $59.90.
US West Texas Intermediate (WTI) futures slipped five cents to $55.86 a barrel. Tumbling oil prices spurred a fresh wave of safe-haven bids for US government debt, sending the 30-year yield to its lowest in more two years as investors worried about how the plunge in crude prices might harm the global economy.
Benchmark 10-year Treasury notes rose 14/32 in price to yield 2.0677 per cent, after yields earlier fell as low as 2.009 per cent.
The dollar hovered at its lowest level against the safe-haven yen in roughly a month.
The euro was last up 0.56 per cent against the dollar at $1.2506. The dollar was last down 0.47 per cent against the yen at 117.25 yen.