Oil prices push closer to $50,
U.S. crude hits highest in 7 months
- Stocks are in bullish mood as oil prices rally back toward $50 a barrel,
- Greece seals a new debt deal, and
- investors come to terms with the prospect of a summer rate hike in the US.
Bloomberg: Global equities rose to a two-week high after U.S. housing data spurred optimism the world’s largest economy can withstand higher interest rates. Oil advanced and gold fell amid a retreat in the dollar.
The MSCI All Country World Index advanced for a second day as futures foreshadowed gains in U.S. shares.
South Africa’s rand and South Korea’s won led gains among major currencies as the Bloomberg Dollar Spot Index fell from a two-month high. The yuan traded near a three-month low after China’s central bank set the weakest reference rate in five years.
Crude rallied above $49 a barrel as gold declined for a sixth day, its longest losing streak since November.
The yield on 10-year U.S. Treasuries held near a three-week high, while Greek bonds rose after creditors agreed to release bailout funds.
The pan-European Stoxx 600 equity index is advancing 0.8 per cent as the financial sector welcomes news of a debt relief agreement between Greece and its creditors.
The cost for Athens to borrow over 10-years is falling 28 basis points to 7.0 per cent, the lowest charge in six months and the Greek stockmarket is climbing 1.2 per cent.
Brent crude, the international energy benchmark, is up 1.3 per cent to $49.23, threatening to break through the $50 mark for the first time since November, while West Texas Intermediate, the US contract for light, sweet crude, is gaining 1.3 per cent to a seven-month high of $49.24.
Also the American Petroleum Institute reported US crude stocks dropped by 5.1m barrels last week, suggesting a market glut may have peaked.
More trader optimism: is Wall Street’s strong showing on Tuesday, when the S&P 500 jumped 1.4 per cent, its best one-day gain since March 11.
Feeling pressure to the downwards from strong dollar, the People’s Bank of China fixed the reference rate for the renminbi 0.3 per cent softer to Rmb 6.5693 per dollar, its weakest level since March 2011.
The ( so called) onshore renminbi, which trades around that midpoint was 0.1 per cent lower today at Rmb6.5603, its weakest level since early February.
Analysts at DBS note the behaviour of many emerging market currencies this month, as the dollar has risen, has been similar to the volatility led by the Fed’s “taper tantrums” from May to August 2013.
Asian currencies did not fare well:
Malaysian ringgit, Indonesian rupiah and Indian rupee, due to high external debt that exceeded foreign reserves, these three currencies are considered vulnerable to a higher USD and higher US interest rates,” they said.
The Australian dollar is adding 0.1 per cent after data showed stronger residential construction data.
The Australian stock market was chipper, lifted by commodity stocks that helped the S&P/ASX 200 pop by 1.5 per cent.
Japan’s Nikkei 225 rise 1.6 per cent,
Hong Kong’s Hang Seng leap 2.6 per cent,
the Shanghai Composite to underperform with a 0.2 per cent loss.
Gold is down from the softer dollar, losing $2 to trade at a seven-week low of $1,224 an ounce