The euro rallied against the US dollar yesterday after European Central Bank president Mario Draghi fuelled market expectations the ECB will reduce stimulus later this year, while the dollar’s weakness helped lift crude prices.
Energy and bank sector stocks rose on Wall Street, leaving the S&P 500 and a global equities index little changed on the day.
The euro hit its highest since early September versus the greenback at $1.1304 as Mr Draghi, speaking to a conference in Portugal, said the ECB could adjust its policy tools as economic prospects improve in Europe.
The dollar index fell 0.7 per cent, with the euro up 1.03 per cent to $1.1294. But the Japanese yen weakened 0.52 per cent versus the greenback at 112.44 per dollar.
Sterling was last trading at $1.278, up 0.47 per cent on the day. The Bank of England raised banks’ capital requirements and warned about levels of credit growth in pockets of the economy.
The dollar weakness helped boost crude futures prices, though the backdrop of a long-standing supply glut kept gains in check.
US crude rose 2.21 per cent to $44.34 per barrel and Brent was last at $46.90, up 2.33 per cent on the day.
Ian Taylor, head of the world’s largest independent oil trader Vitol, told Reuters that Brent prices would stay in a range of $40-$55 a barrel for the next few quarters.
“In the third quarter we should draw (down stocks), but we are unsure about the fourth quarter as US production is likely to have a year-end spurt,” Mr Taylor said.
On Wall Street, energy stocks tracked the price of oil higher while banks also helped keep the S&P 500 afloat.
The Dow Jones Industrial Average rose 25.3 points, or 0.12 per cent, to 21,434.85, the S&P 500 gained 0.65 points, or 0.03 per cent, to 2,439.72 and the Nasdaq Composite dropped 19.60 points, or 0.31 per cent, to 6,227.55.
Yesterday, the pan-European FTSEurofirst 300 index lost 0.70 per cent and MSCI’s gauge of stocks across the globe shed 0.02 per cent.
Emerging market stocks lost 0.17 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.14 per cent lower, while Japan’s Nikkei rose 0.36 per cent.
United States Treasury yields rose in sympathy with European government debt weakness, after Mr Draghi’s comments.
“He surprised the market with that upbeat stance,” said Tom di Galoma, a managing director at Seaport Global in New York.
“The European government bond market didn’t take it very well.”
Meanwhile, benchmark 10-year notes last fell 19/32 in price to yield 2.2016 percent, from 2.137 per cent late on Monday.
Gold prices, which tumbled to their lowest level in nearly six weeks on Monday, were supported by the softer dollar.
Spot gold added 0.2 per cent to $1,246.35 an ounce. US gold futures gained 0.09 per cent to $1,247.50 an ounce.
Copper rose 1.10 per cent to $5,858.00 a tonne.