World stocks advanced yesterday and were poised for a modest gain to end the week as a drop in the dollar helped boost sagging oil prices.
The dollar fell against a basket of major currencies as preliminary data on US factory and services activities in June fell short of analyst forecasts, stoking doubts about US economic growth for the rest of 2017.
That drop in the greenback helped crude oil pull away from 10-month lows, although prices were still set for their worst first-half performance since 1997. On the week, both Brent and WTI crude have lost nearly 4 per cent.
“Oil is probably trying to recoup some of the losses that they’ve had this week,” said Jim Davis, regional investment manager at US Bank Wealth Management in Springfield, Illinois. US crude rose 0.84 per cent to $43.10 per barrel and Brent was last at $45.64, up 0.93 per cent on the day.
The climb in crude helped lift energy stocks on Wall Street, with the group up 0.8 per cent as the best performing of the major S&P sectors. The US dollar briefly managed to recoup some of its declines after economic data showed new US single-family home sales rose in May and the median sales price surged to an all-time high. The PHLX housing index advanced 0.7 per cent. The Dow Jones Industrial Average rose 14.29 points, or 0.07 per cent, to 21,411.58, the S&P 500 gained 4.95 points, or 0.20 per cent, to 2,439.45 and the Nasdaq Composite added 15.91 points, or 0.26 per cent, to 6,252.60.
“The data has been mixed today and it kind of reflects what has been going on all month and that is the economy, both globally and in the US, we are expanding but the pace of expansion is not accelerating,” Mr Davis said.
The slide in energy prices in recent weeks has worsened the outlook for inflation, creating a problem for the world’s major central banks as they attempt to normalize interest rates after years of ultra-loose policy.
The pan-European FTSEurofirst 300 index lost 0.18 per cent and MSCI’s gauge of stocks across the globe gained 0.25 per cent. The dollar index fell 0.37 per cent, with the euro up 0.44 per cent to $1.1199. The dollar peaked at a one-month high on Tuesday following comments with a hawkish tone from Fed officials including New York Fed President William Dudley and Boston Fed President Eric Rosengren. But it has been stuck in a tight range since and virtually flat on the week.
Earlier yesterday, St Louis Fed President James Bullard said the central bank should wait on any further rate increases until it is clear inflation is reliably heading to the Fed’s two per cent target.