Crude oil prices spiked yesterday on worries over supply as violence escalated in Iraq, while a global stocks index edged down after Wall Street ticked lower.
Crude jumped after Iraqi Kurdish forces took control of the northern oil city of Kirkuk, in the face of a triumphant Sunni Islamist rebel march towards Baghdad that threatens Iraq’s future as a unified state.
Brent crude futures rose two per cent, the most in four months, to $112.12 a barrel, the highest since early March. US crude added 1.4 per cent to $105.86, its highest since September. Prices could rise further as events unfold in Iraq. The Thomson Reuters/Jefferies CRB index rose the most in two months.
“There are no immediate oil export implications in as much as the latest news is about Kirkuk ... and that has a limited impact because the northern pipeline has been down for months already,” said Gareth Lewis-Davies, a strategist at BNP Paribas.
On Wall Street, stocks were lower after US retail sales rose less than expected in May and first-time applications for unemployment benefits increased last week.
The decline was partly offset by higher prices in energy stocks on the heels of the jump in oil prices.
The crude spike “is a significant move but not enough to impact economic growth here in the US, at least not yet,” said Phil Orlando, chief equity market strategist at Federated Investors in New York.
The Dow Jones industrial average fell 58.61 points or 0.35 per cent, to 16,785.27, the S&P 500 lost 6.84 points or 0.35 per cent, to 1,937.05 and the Nasdaq Composite dropped 12.91 points or 0.3 per cent, to 4,319.02.
The FTSEurofirst 300 index of top European shares was flat, just off the six-and-ahalf-year high of 1,398.65 hit earlier this week. MSCI’s global stocks gauge fell 0.1 per cent.
The New Zealand dollar jumped the most in four months to hit its highest since mid-May after the central bank raised interest rates and kept a hawkish bias.
The euro hit a low of $1.3510 against the US dollar, near the low of $1.3503 hit last Thursday after the European Central Bank cut rates, before rebounding on the weaker-than-expected US data. The euro is, however, set to post its fifth week of losses versus the dollar in the last six.
The shared currency was recently up 0.1 per cent at $1.3551.
In fixed income, US Treasuries edged up marginally in price after the soft data, though the generally upbeat view on the US economy remains. Markets continue to look forward to a Federal Reserve meeting next week. Fed Chair Janet Yellen is expected to be pressured on the timeline for rate hikes in a press conference on Wednesday.
US 10-year notes were up 5/32 in price to yield 2.624 per cent, from 2.641 per cent late on Wednesday. The 30-year bond was up 5/32 ahead of an auction later in the day.