Oil bounces, results keep stocks on high

OIL’S rise back above $50 (R652) a barrel helped prod stock markets higher yesterday, while company results and economic data continued to soothe worries that the global economy may be ripe for a another slowdown.

European stock markets rose about 0.5%, led by energy- and commodity-linked firms, after Brent crude topped the $50 mark for the first time since early last month and copper added another 1% 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% on the day, and US stocks futures showed that 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 US Federal Reserve’s two-day policy meeting.

“The indications are more positive on the outlook for energy stocks,” said Angelo Meda, the 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%, in line with euro-zone stocks and blue chips, as oil and gas stocks gained 0.7%.

Germany’s Ifo business survey on Tuesday showed confidence soaring to record highs this month 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 to recover some ground in US and Asian trading yesterday, with traders citing a trimming of positions ahead of the Federal Reserve 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% 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 (Wednesday),” 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.” – Reuters