The U.S. government has reported a larger-than-expected drop in crude inventories.
For the first time in seven months Brent crude rose to levels above $50 a barrel. Asian shares however did not ride this wave as they are still struggling to cope with China’s cooling economy and the impending rise of U.S. interest rates.
“The market environment is not bad overall. Oil prices are rising, which would benefit oil producing countries. But Asia may be hurt by concerns about the Chinese economy,” said Shuji Shirota, associate director at HSBC in Tokyo.
He went on to add, “The market’s focus is returning to the Fed, given rising expectations that they could hike rates much earlier than expected. That is weighing on many emerging markets as well.”
Japan’s Nikkei rose by 0.3% but MSCI’s broadest index of Asia-Pacific shares outside Japan moved horizontally. It struggled to rebound from its 12-week low.
In China, shares fell by more than 1% due to the emergence of disappointing economic data. Also fears that policy makers are taking too meek a stance in their stimulus program while debt levels expand is contributing to the performance of the market.
In Europe, led by the European banks, share rallied overnight in the wake of Eurozone finance ministers proposing new rules for debt relief to Greece. They have also released more funds to it.
On Wall Street, the S&P 500 Index rose by 0.7% to 2,091, a new high in almost a month. It even touched a six-month intraday high of 2,111. With the surge of oil prices, energy stocks outperformed the index and hit their 7 month highs. Incidentally the U.S. government has also reported a larger-than-expected drop in crude inventories.
Brent futures rose by 34 cents to $50.08 a barrel, its highest level since early November last year. U.S. West Texas Intermediate hit its seven-month high of $49.88.
This rally in the Europe and in the U.S. comes in the wake of the U.S. Federal Reserve plan of tightening monetary policies.
Market players are watching what Fed Chair Janet Yellen’s will comment during her speech at Harvard University, scheduled for tomorrow, although many opine that her words on June 6, when the data of the U.S. payrolls will be released, will be more crucial.
Recent comments by Fed policymakers have placed a possible rate hike on the table for this summer. However, U.S. interest rate futures are still pricing in only about one-third chance of a rate hike in June and a 60% chance of its likelihood in July.
These prospects have undermined the investment attraction of gold which has seen its prices fall to $1,217.90 per ounce, its seven week low. Asian gold prices are however at $1,231.
Categories: Economy & Finance, Strategy
manageria.biz 
Leave a comment