Oil bounce, cor­po­rate re­sults keep stocks high

Kuwait Times - - BUSINESS -

Oil’s rise back above $50 a bar­rel helped prod stock mar­kets higher yes­ter­day, while com­pany re­sults and eco­nomic data con­tin­ued to soothe wor­ries that the world econ­omy may be ripe for a an­other slow­down. Euro­pean stock mar­kets rose around half a per­cent, led by en­ergy and com­mod­ity-linked firms af­ter Brent crude topped the $50 mark for the first time since early June and cop­per added an­other 1 per­cent to this week’s surge.

A slightly less bullish per­for­mance in Asia pulled the MSCI world eq­uity in­dex, which tracks shares in 46 coun­tries, off all-time highs overnight. But early in the Euro­pean ses­sion, it was up 0.1 per­cent on the day, and US stocks fu­tures showed Wall Street should edge higher on open­ing.

Strong re­sults from en­ergy firms Sub­sea 7 and Tul­low Oil helped Euro­pean shares, but banks weighed on in­dex-level gains as in­vestors awaited the out­come later yes­ter­day of the Fed­eral Re­serve’s two-day pol­icy meet­ing. “The in­di­ca­tions are more pos­i­tive on the out­look for en­ergy stocks,” said An­gelo Meda, head of eq­ui­ties at Banor SIM in Mi­lan, adding that firms had re­set ex­pec­ta­tions on val­u­a­tions and cleaned up their bal­ance sheets.

“The out­look is not so bad (...) We are still miss­ing one com­po­nent which is the com­men­tary from big oil firms To­tal, BP, Royal Dutch Shell.” The pan-Euro­pean STOXX 600 gained 0.4 per­cent, in line with euro zone stocks and bluechips, as oil and gas stocks gained 0.7 per­cent. Ger­many’s Ifo busi­ness sur­vey on Tues­day showed con­fi­dence soar­ing to record highs in July amid what its economists de­scribed as a ‘eu­phoric’ mood in Ger­man in­dus­try, while US con­sumer con­fi­dence lev­els jumped to near 16-year highs.

The lat­ter num­bers helped the dol­lar re­cover some ground in US and Asian trad­ing yes­ter­day, with traders cit­ing a trim­ming of po­si­tions ahead of the Fed meet­ing, not due un­til late in the US ses­sion.

The dol­lar, hurt since March by a re­treat in ex­pec­ta­tions for fur­ther rises in in­ter­est rates this year, gained just over 0.1 per­cent against both the euro and the euro-dom­i­nated bas­ket of cur­ren­cies most used to mea­sure its broader strength. “Most peo­ple have an ul­tra-be­nign view of what we will get out of the Fed to­day,” said Koon Chow, a strate­gist at Swiss pri­vate bank UBP.

“The fo­cus is not so much on the next hike but the start of the roll off [re­duc­tion of the cen­tral bank’s bal­ance sheet]. The Fed has al­ready helped us a lot by in­di­cat­ing that when it hap­pens it will be a very grad­ual process.”

Asia mar­kets up

Asian mar­kets mostly rose yes­ter­day, led by en­ergy gi­ants on ris­ing com­mod­ity prices, while traders were also buoyed by strong earn­ings and pos­i­tive eco­nomic data that saw Wall Street rack up fresh records.

Im­prov­ing de­mand and the weak­en­ing dol­lar helped fuel a jump in cop­per prices to five-month peaks, while oil has also been boosted by a re­port point­ing to lower US stock­piles. Both crude con­tracts jumped three per­cent Tues­day with traders also cheered by news that global crude pro­duc­ers, meet­ing in Rus­sia Mon­day, called for stricter ad­her­ence to an agree­ment to cut out­put.

Big-name en­ergy firms flew yes­ter­day with BHP up more than three per­cent and Rio Tinto 2.6 per­cent higher in Syd­ney, while Hong Kong-listed CNOOC added 2.3 per­cent and PetroChina was up more than three per­cent. Tokyo’s In­pex and JXTG Hold­ings piled on more than one per­cent.

“Things are look­ing a lit­tle bit bet­ter,” Michael Loewen, a strate­gist at Sco­tia­bank in Toronto, told Bloomberg News.

“If we con­tinue to see de­mand do well and some re­fined prod­ucts draws in gaso­line and dis­til­lates, the mar­ket should per­form pretty well.” But the longterm out­look for oil could be weak with­out deeper out­put curbs by OPEC, said Richard Gorry, man­ag­ing di­rec­tor at in­dus­try con­sul­tant JBC Asia.

Prices are cur­rently sup­ported by the sum­mer driv­ing sea­son which ramps up de­mand but that trend will re­verse from early Septem­ber as con­sump­tion weak­ens, he added.

On stock mar­kets Tokyo ended 0.5 per­cent higher, while Hong Kong added 0.3 per­cent in the af­ter­noon and Shang­hai closed up 0.1 per­cent.

Syd­ney ended up 0.9 per­cent and Sin­ga­pore was 0.3 per­cent higher. Manila was up 1.1 per­cent but there were losses in Seoul and Taipei. — Agen­cies

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