Crude oil prices rose yesterday to their highest in three weeks on hopes for a pact among oil producers to cut output, while the dollar slipped on bets that interest rate hikes by the Federal Reserve would be more gradual than it has suggested.
World stock markets were mixed. Wall Street indexes were mostly little changed after advancing earlier on a boost from the energy sector, while shares in Europe fell following disappointing earnings reports.
The persistent volatility in US and European equity markets underpinned demand for US and German government bonds.
However, gold, normally considered a safer asset in times of turbulence, retreated from 12-week highs.
“Once the oil market establishes stability, it would be good for the global economy,” said Ron D’Vari, chief executive officer at NewOak Capital LLC in New York.
Russian energy minister Alexander Novak and a senior Gulf Opec delegate suggested that major oil producers may pare production in an effort to ease a global supply glut that has hammered oil prices over the past year and a half.
Benchmark Brent futures jumped as much as eight per cent to nearly $36 a barrel on news of the potential deal. They were last up $1.03, or 3.11 per cent, at $34.13 a barrel. US crude was last up $0.88, or 2.72 per cent, at $33.18 per barrel.
Tumbling energy prices, stemming from worries about weakening demand from world No. 2 economy China, have roiled financial markets. This was a concern the Fed cited as a factor for keeping its key policy rate at 0.25-0.50 per cent on Wednesday.
The Fed’s worry over global and financial developments spurred selling in the dollar against most major currencies as traders reckoned US policymakers would ease back on plans for four possible quarter-point rate hikes for 2016 that they had signalled at their December policy meeting.
The dollar index, which gauges the greenback against the euro, yen and four other currencies, was last down 0.4 per cent at 98.543.
The possibility of a slower path for US rate hikes was seen as less welcome by stock market participants as some had hoped the Fed might put the brakes on raising rates altogether.
US stocks were mixed after earlier advancing, amid some disappointment the US central bank didn’t hint it would back away from hiking interest rates this year.
The Dow Jones industrial average fell 34.45 points, or 0.22 per cent, to 15,910.01, the S&P 500 fell 0.17 points, or 0.01 per cent, to 1,882.78 but the Nasdaq Composite was up 12.74 points, or 0.29 per cent, to 4,480.90.
Europe’s FTSEurofirst 300 index of top shares fell 1.74 per cent, to 1,317.49 due to disappointing corporate results.
The MSCI world equity index, which tracks shares in 45 nations, fell 0.22 per cent to 366.26.
In the bond market, benchmark 10-year Treasury notes were little changed in price for a yield of 2.003 per cent, while 10-year German Bunds were yielding 0.408 per cent, down four basis points.
Spot gold prices fell $9.38 or 0.83 per cent, to $1,115.81 an ounce.