Global equity markets rebounded yesterday, paced by a strong rise in oil prices, but were still on track for a weekly decline, while the dollar managed to stem its slide against the yen.
Stocks on Wall Street and in Europe were lifted by energy names, as both Brent and US crude oil saw gains of more than five per cent on hopes a global excess of crude could be nearing a tipping point. Economicindicators from the US and Germany cast a positive light on growth in fuel demand.
Global benchmark Brent crude futures jumped 5.3 per cent to $41.53 per barrel, and were up more than seven per cent on the week. US crude surged 6.2 per cent to $39.55, for a 7.4 per cent weekly gain.
The STOXX 600 Europe Oil and Gas index was more than three per cent while the S&P energy index climbed two per cent as the top performing sectors in each region, tracking the rise in crude prices.
The Dow Jones industrial average rose 88.62 points, or 0.51 per cent, to 17,630.58, the S&P 500 gained 11.97 points, or 0.59 per cent, to 2,053.88 and the Nasdaq Composite added 14.88 points, or 0.31 per cent, to 4,863.24. Despite yesterday’s gains, the S&P 500 was on course for its biggest weekly decline in two months.
MSCI’s index of world shares rose 0.95 per cent but was down 0.3 per cent for the week. The FTSEurofirst 300 climbed 1.2 per cent but was still on pace for its fourth straight weekly decline, which would be its longest losing streak since October 2014.
Much of the volatility this week has been fuelled by the yen’s surge against the dollar, which caught many market participants off-guard and increased speculation Tokyo could intervene in the currency market to halt the rally.
The dollar briefly traded above 109 yen, recovering from its first break below 108.00 since October 2014 the previous day. Japan’s Finance Minister Taro Aso said the government would take steps to counter “one-sided” moves in the yen in either direction.
The dollar was last up 0.4 per cent at 108.66 yen, with a weekly fall of 2.7 per cent. On Thursday it fell as low as 107.67 yen. Sharp appreciation of the safe-haven yen against the dollar is often a warning sign of broader financial market stress and investor risk aversion, which has been exacerbated this week by growing uncertainty surrounding the US economic and policy outlook.
Federal Reserve chair Janet Yellen, in a conversation with former Fed chairmen on Thursday, said the US economy is on a solid course and still on track to warrant further interest rate hikes.
New York Fed president William Dudley yesterday said the central bank must approach further rate hikes cautiously and gradually because of lingering external risks to the US economy, despite some strength at home and welcome hints of inflation.
The comments helped push benchmark 10-year Treasuries down 12/32 in price to yield 1.7306 per cent after hitting a low six-week of 1.685 per cent on Thursday.