US and European stock markets recovered yesterday after a rebound in oil prices boosted energy shares, with some strong European earnings reports also supporting stocks in the region, while the dollar rose ahead of today’s US employment data.

Oil prices jumped two per cent as a huge wildfire near Canada’s oil sands region and escalating tensions in Libya stoked concerns among investors of a near-term shortage in supply.

The rally in crude prices helped lift the S&P energy index 1.4 per cent, making it the lead gainer among the 10 major S&P sectors. Investors awaited monthly jobs data today, which is expected to show that non-farm payrolls likely rose by 202,000 in April and the unemployment rate held at five per cent.

Firmer oil prices also lifted shares of major European oil producers, while encouraging European earnings updates from firms including telecoms group BT and oil company Repsol helped prop up the stock market.

Yesterday’s gains in the S&P 500 stock index came after two straight days of losses, while the gains in European shares came after four days of losses.

“What we’re seeing is a bit of a relief rally from oversold levels,” said Adam Sarhan, chief executive of Sarhan Capital in New York.

MSCI’s all-country world equity index was last down 0.24 points, or 0.06 per cent, at 395.99.

The Dow Jones industrial average was last up 49.38 points, or 0.28 per cent, at 17,700.64. The S&P 500 was last up 4.74 points, or 0.23 per cent, at 2,055.86. The Nasdaq Composite was last up 8.53 points, or 0.18 per cent, at 4,734.17.

Europe’s broad FTSEurofirst 300 index was last up 0.31 per cent at 1,306.8.

Brent crude was last up 89 cents, or 1.99 per cent, at $45.51 a barrel. US crude was last up $1.05, or 2.4 per cent, at $44.83 per barrel.

The US dollar rose against a basket of currencies for a third day as traders closed out profitable bets against the greenback before today’s US jobs report.

The dollar index, which measures the greenback’s value versus six currencies, rose to its highest level in a week of 93.862 after falling to its lowest in over 15 months on Tuesday of 91.919.

The dollar also rose against the yen to a six-day high of 107.49 yen after hitting an 18-month low on Tuesday of 105.52 yen.

“We are seeing some short covering lifting the dollar against most major currencies,” said Ron Simpson, director of currency research at Action Economics in Tampa, Florida. “You can largely attribute it to tomorrow’s nonfarm payrolls report.”

US Treasury yields were little changed as the number of Americans filing for unemployment benefits rose unexpectedly but remained within the range of a strong labour market, leaving investors with no clear signals ahead of the US jobs report.

Benchmark 10-year US Treasury yields were last at 1.78 per cent.

Spot gold prices fell $2.51 or 0.2 per cent, to $1,276.60 an ounce.

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