Oil prices surged yesterday after a report showed a drop in US crude stockpiles, fuelling energy shares and helping lift Wall Street after two down sessions.
In Europe, bond yields jumped while pan-European STOXX index slumped 0.6 per cent, with markets rattled by the prospect of the region’s central bank eventually winding down its bond-buying stimulus.
Oil prices rose to their highest since June after the US government reported another surprise weekly drawdown in crude inventories.
The US Energy Information Administration (EIA) said crude stockpiles fell nearly three million barrels for the week ended Sept. 30, marking a fifth straight weekly drop. Analysts polled by Reuters had forecast a build of 2.6 million barrels.
Brent crude was up 2.1 per cent, at $51.94 a barrel, while US West Texas Intermediate crude rose 2.3 per cent at $49.83.
The Dow Jones industrial average rose 111.34 points, or 0.61 per cent, to 18,279.79, the S&P 500 gained 9.25 points, or 0.43 per cent, to 2,159.74 and the Nasdaq Composite added 30.66 points, or 0.58 per cent, to 5,320.31.
The energy sector gained 1.5 per cent. US stocks have been pressured this week by concerns over Britain’s exit from the European Union and expectations of a Federal Reserve interest rate increase in the coming months.
Chicago Federal Reserve Bank President Charles Evans said he would be “fine” with raising US interest rates by year-end if US economic data continued to come in firm.
Traders see a 64-per cent chance the Fed will hike at its December meeting, according to the CME FedWatch website.
“People are certainly waiting for that inevitable interest rate rise by the Fed, but I think they’re just not sure if that’s a sign that things are better and earnings are likely to improve, or a reason for people to sell stocks because rates are rising,” said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.
Euro zone bond yields soared amid concerns the European Central Bank might reduce its asset purchases before the programme finally ends. A Bloomberg article on Tuesday cited sources as saying the ECB would probably wind down the monthly 80-billion euro scheme gradually.
Germany’s 10-year Bund yield - the euro zone benchmark - rose more than eight basis points to nearly flat. Italy’s 10-year bond yield rose nearly 10 basis points to 1.358 per cent.