World shares climbed yesterday as oil prices above $80 a barrel lifted US energy stocks and as some central banks were expected to raise interest rates, spurring investors to look beyond the latest round of US-China tariffs.
On Wall Street, energy shares rose along with banks, which climbed in anticipation of a US Federal Reserve rate hike. US shares then lost some steam, weighed by losses in Facebook and chipmakers.
The Dow Jones Industrial Average rose 13.91 points, or 0.05 per cent, to 26,575.96, the S&P 500 gained 0.54 points, or 0.02 per cent, to 2,919.91 and the Nasdaq Composite added 6.31 points, or 0.08 per cent, to 7,999.55.
MSCI's gauge of stocks across the globe gained 0.11 per cent, while the pan-European FTSEurofirst 300 index rose 0.51 per cent.
Concerns over trade tensions between the US and China were offset by oil, which grabbed the spotlight and added to gains after surging more than three per cent on Monday. Brent crude futures shot to four-year highs of almost $82 a barrel, catapulted by imminent US sanctions on Iranian crude exports and the apparent reluctance of OPEC and Russia to raise output to offset the potential hit to global supply.
US crude rose 0.21 per cent to $72.23 per barrel and Brent was last at $82.09, up 1.1 per cent on the day.
The rise in energy shares, however, failed to squash broader market pessimism after new tariffs imposed by Beijing and Washington on each other's goods kicked in on Monday, and Chinese Vice Commerce Minister Wang Shouwen accused the United States of putting "a knife to China's neck."
There are other big worries for investors too, not least the timing and pace of central bank policy tightening. While the Fed is poised to hike rates for a third time in 2018 this week, European Central Bank President Mario Draghi on Monday raised expectations the eurozone will also start to normalize policy over the coming year by referring to "relatively vigorous" underlying inflation and brisk wage growth. That pushed German 10-year bond yields to four-month highs above 0.5 per cent.
US 10-year Treasury yields touched a new four-month high above 3.10 per cent in advance of government debt supply and on bets about Fed interest rate hikes.
The US dollar weakened ahead of the Fed's two-day policy meeting, as investors have already priced in two more interest rate increases this year and some in 2019, leaving little room for further currency gains.
The dollar index, tracking it against a basket of major currencies, fell 0.06 per cent, with the euro up 0.16 per cent to $1.1765.
"The US dollar appears vulnerable... given extended speculative bullish positioning against most of the G10 currencies," said Eric Theoret, currency strategist at Scotiabank in Toronto.