September 25, 2018 / 7:24 PM / 3 months ago

GLOBAL MARKETS-Oil price above $80 lifts stocks, rate hikes expected

    * Bond yields rising on expectation of more policy
tightening
    * Oil at four-year highs on supply concerns
    * Dollar slumps as investors anticipate Fed hike
    * GRAPHIC-World FX rates in 2018: tmsnrt.rs/2egbfVh

 (Adds settled oil prices; updates throughout)
    By Hilary Russ
    NEW YORK, Sept 25 (Reuters) - European shares climbed on
Tuesday as oil prices above $80 a barrel lifted energy stocks,
while U.S. stocks slid on losses in chipmakers and
rate-sensitive shares ahead of an expected Federal Reserve
interest rate hike.
    U.S. consumer confidence also unexpectedly rose in
September, lifting it to levels last seen in 2000, the
Conference Board said, underscoring strength in the labor market
and overall economy.                          
    The Dow Jones Industrial Average        fell 69.72 points,
or 0.26 percent, to 26,492.33, the S&P 500        lost 4.38
points, or 0.15 percent, to 2,914.99 and the Nasdaq Composite
        added 10.05 points, or 0.13 percent, to 8,003.29.
    The pan-European FTSEurofirst 300 index          rose 0.54
percent and MSCI's gauge of stocks across the globe
                gained 0.02 percent.
    "A lot of the noise around trade and anything else around
politics really hasn't suppressed consumer confidence nearly to
the degree that the other factors have boosted it," said Mike
Dowdall, investment strategist for BMO Global Asset Management,
in Chicago.
    Brent crude futures         shot to four-year highs of
almost $82 a barrel, catapulted by imminent U.S. sanctions on
Iranian crude exports and the apparent reluctance of OPEC and
Russia to raise output to offset the potential hit to global
supply.                      
    "The combination of tight supply, healthy demand, falling
global inventories – down from already under-stored levels – and
anemic spare capacity helps support an oil price which could end
the year above $90," Richard Robinson, manager of Ashburton's
Global Energy Fund, said.   
    U.S. crude oil futures        settled at $72.28 per barrel,
up 20 cents or 0.28 percent. Brent         settled at $81.87, up
67 cents or 0.83 percent.
    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 euro zone 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 percent.
    U.S. 10-year Treasury yields held at a new four-month high
            above 3.10 percent after a $38 billion government
debt sale on Tuesday.                         
    Benchmark 10-year notes last fell 7/32 in price to yield
3.1039 percent, from 3.078 percent late on Monday.
    The U.S. 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        fell 0.05 percent, with the euro
       up 0.16 percent to $1.1765.
    Since mid-August, the dollar has declined 3.1 percent
against that basket of currencies.
    "The U.S. dollar appears vulnerable... given extended
speculative bullish positioning against most of the G10
currencies and considerable tightening already reflected in fed
funds futures," said Eric Theoret, currency strategist at
Scotiabank in Toronto.
    The drifting dollar helped gold edge higher. Spot gold
       added 0.2 percent to $1,201.01 an ounce. 

    
 (Additional reporting by Amy Caren Daniel in Bengaluru; Jessica
Resnick-Ault, Richard Leong, Gertrude Chavez-Dreyfuss, Renita D.
Young and Maytaal Angel in New York; Editing by Bernadette Baum
and Andrea Ricci)
  
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