Global stocks advance as crude oil prices stage modest rebound

Dollar weakens for second consecutive session

NEW YORK, June 22, (Agencies): World stock markets edged higher on Thursday, buoyed by a slight rebound in oil prices after hitting seven-month lows, while the US dollar weakened for a second consecutive session.

Oil edged up from November lows hit in the prior session, but prices remained under pressure from a supply glut that has persisted despite OPEC-led efforts to balance the market.

US crude rose 1.62 percent to $43.22 per barrel and Brent was last at $45.71, up 1.99 percent on the day.

With the gains, the energy sector in Europe remained under pressure, down 0.4 percent, but well off earlier lows. The index is down about 2 percent on the week and is on track for its fifth straight weekly drop.

Those declines weighed on European shares but the picture was reversed on Wall Street, with energy up 0.5 percent, among the best performing sectors.

The pan-European FTSEurofirst 300 index lost 0.01 percent and MSCI’s gauge of stocks across the globe gained 0.20 percent.

Since peaking in late February, crude has dropped around 20 percent, with only brief rallies, completely erasing gains at the end of the year after the initial OPEC-led production cut.

Oil’s decline has hurt energy stocks and curbed investor expectations for higher inflation that would enable major central banks to pursue tighter monetary policies.

Subdued inflation and concerns about the outlook for world growth when the US Federal Reserve is raising interest rates have led to a flattening in bond yield curves.

The dollar index fell 0.05 percent, with the euro down 0.07 percent to $1.1158.

US

Wall Street moved higher in early afternoon trading on Thursday as health stocks got a boost after Republicans unveiled a bill to repeal Obamacare and the energy sector rebounded as oil prices rose from multi-month lows.

The S&P healthcare index rose 1.58 percent to hit a record high as investors cheered the bill, which is aimed at curbing Medicaid funding and reshaping subsidies to low-income people for private insurance.

United Health, Johnson and Johnson and Gilead rose between 1 percent and 5.3 percent, and were among the biggest boosts on the three major indexes.

The Nasdaq biotechnology index rose 1.96 percent and is now up more than 9 percent for the week.

A slight rebound in oil prices also relieved some pressure. US crude was up 1.4 percent at $43.16 per barrel, while global benchmark Brent was 1.76 percent higher at $45.62.

Since peaking in late February, crude has dropped around 20 percent, skidding into bear market territory, despite OPEC-led efforts to stabilize the market.

The S&P energy index is the worst performing sector so far this year, having lost about 15 percent. The broader S&P 500 index rose about 9 percent in the same period.

At 12:57 p.m. ET (1657 GMT), the Dow Jones Industrial Average was up 25.49 points, or 0.12 percent, at 21,435.52, the S&P 500 was up 5.26 points, or 0.21 percent, at 2,440.87.

The Nasdaq Composite index was up 20.76 points, or 0.33 percent, at 6,254.72.

Investors are also concerned that the drop in oil prices could affect inflation. Inflation remains stubbornly below the Federal Reserve’s 2 percent target, even as the central bank adopts a hawkish tone regarding future rate hikes.

Among stocks, Accenture was off 3.9 percent after the consulting and outsourcing services provider trimmed its annual revenue forecast.

Oracle, up 8.5 percent, provided the biggest boost to the S&P after the company forecast an upbeat currentquarter profit.

Tesla was up 1.9 percent at $383.35 after the company said it was in exploratory talks with the Shanghai municipal government to establish an electric vehicle manufacturing plant in China.

Advancing issues outnumbered decliners on the NYSE by 1,894 to 943. On the Nasdaq, 1,774 issues rose and 1,0003 fell.

Europe

A rise in European health stocks helped pull European shares out of negative territory on Thursday, pegged back by the slide in the energy sector on the back of weakened oil prices.

The pan-European STOXX 600 index ended the session flat following two days of straight losses, while the blue chips were also flat.

Health care was the top-gaining sector, up 2 percent and briefly touching its highest level since December 2015, with Switzerland’s Novartis in the driving seat.

Novartis’ shares marched 5 percent higher following a positive study result for its canakinumab medicine, which cuts risks for heart attack survivors.

“Expectations around this catalyst have been low and as a result we have previously highlighted success could drive 3% to 5% upside to mid-term EPS and valuations,” analysts at Jefferies said in note.

Oil continued to dog European shares, however, as prices eased slightly off multi-month lows. Europe’s energy sector was down 0.3 percent, touching near-7-month lows.

“What didn’t help were those conflicting comments from OPEC ... and Iran. They need to be singing from the same hymn sheet if we are to believe that there’s positivity to be taken from these cuts while the US continues to produce more and the rig-count goes up,” Mike van Dulken, head of research at Accendo Markets, said.

“As we saw yesterday, even a drawdown in stockpiles offered absolutely no help because it just added to the murky outlook.”

Likewise pessimism on the oil sector and concerns around a 2018 supply glut from broker Morgan Stanley put pressure on shares in Subsea 7, which they downgraded to “equal weight”.

Subsea 7’s shares dropped 4.4 percent to the bottom of the STOXX.

Elsewhere, Imagination Tech, once a high flyer as a supplier of graphics technology to Apple <AAPL.O, soared more than 20 percent after it put itself up for sale.

In April, Apple said that it would no longer use Imagination’s graphics technology in the iPhone, wiping out more than 60 percent of the British firm’s market value.

Asia

Energy firms struggled again in Asian trade Thursday after fresh plunge in oil prices as supply glut fears returned, while regional equities saw a mixed response to the previous day’s sell-off.

Crude edged lower in volatile Asian trade and is down around 25 percent from its January highs, sitting at levels not seen since August.

That has dug into energy firms for another day. In Hong Kong, Sinopec and PetroChina each slipped 0.4 percent. Inpex tumbled 1.5 percent in Tokyo, although Sydney-listed Woodside Petroleum edged up 0.1 percent on bargain-buying.

Broader markets began the day on a high but struggled towards the end of trade. Hong Kong finished 0.1 percent down, Sydney put on 0.7 percent while Singapore gained 0.4 percent and Seoul 0.5 percent.

Shanghai ended 0.3 percent down after Wednesday’s rally that was fuelled by MSCI finally approving Chinese mainland-listed or A-shares for inclusion in its emerging markets index.

Tokyo was 0.1 percent lower, with Takata the standout loser. The airbag maker crashed 55 percent Thursday on fears it is headed for bankruptcy and plans to sell its assets to a US company.

The Tokyo-based company at the centre of the global auto industry’s biggest-ever safety recall has tumbled for four straight days and its stock is now worth less than a quarter of its value just a week ago.

In currency trade the dollar was unable to break out against the pound and yen, despite Federal Reserve indications it will hike interest rates again this year.

Key figures around 0820 GMT Tokyo - Nikkei 225: DOWN 0.1 percent at 20,110.51 (close)

Hong Kong - Hang Seng: DOWN 0.1 percent at 25,674.53 (close)

Shanghai - Composite: DOWN 0.3 percent at 3,147.45 (close)

Dollar/yen: DOWN at 111.02 yen from 111.42 yen

Oil

Oil edged up from multi-month lows on Thursday, but prices remained under pressure from a supply glut that has persisted despite OPEC-led efforts to balance the market.

Brent crude futures were up 60 cents at $45.42 a barrel at 1407 GMT, after falling as low as $44.53. They fell 2.6 percent in the previous session to $44.35, their lowest since November.

US crude futures were up 40 cents at $42.93 a barrel, after also slipping. On Wednesday, they touched $42.05, their lowest intraday level since August 2016.

“Prices were pushed a bit too low,” Hans van Cleef, senior energy economist with ABN AMRO, said. “The people who believe in higher prices are stepping in.”

Since peaking in late February, crude has dropped around 20 percent, erasing gains at the end of the year in the wake of the initial OPEC-led production cut.

The Organization of the Petroleum Exporting Countries and other producers agreed to reduce output by 1.8 million barrels per day (bpd) from January for six months, and last month extended the deal for a further nine months.

But oversupply has persisted, particularly with output rising in Libya and Nigeria, which were exempt from the cuts due to unrest that had limited their output.

Gold

Gold rose on Thursday as oil prices languished near seven-month lows, denting risky assets such as stocks while the dollar retreated.

Spot gold was up 0.5 percent at $1,252.12 per ounce by 1353 GMT. It had added 0.3 percent in the previous session after briefly touching a fiveweek low of $1,240.75.

US gold futures for August delivery rose 0.6 percent to $1,252.80 per ounce.

“The weakness on the equity market is a factor providing support to gold,” said Carsten Menke, an analyst at Julius Baer.

Gold is often seen as a safe-haven option at times of volatility in riskier markets such as stocks.

European equities took a battering as oil prices hovered near seven-month lows on concerns about a supply glut.

“The uncontrolled oil price spill in the futures markets may have seen some traders pushing the risk aversion button and buying gold,” said Jeffrey Halley, senior market analyst at OANDA.