LONDON: Global optimism lifted equity markets Thursday, fueled by oil breaking through $50 and a debt deal for Greece, but gains were curtailed by profit-taking pending G7 developments and any hints on the next US rate move.
“The fresh leg higher in oil we saw Wednesday, with (Brent oil) breaking above $50 a barrel for the first time since October 2015, has only served to provide more fuel to the rally,” said XTB brokerage analyst David Cheetham.
In Europe, Frankfurt, London and Paris extended Wednesday’s gains that were won on the back of Greece news, bright German data, easing Brexit concerns and firmer oil prices.
But Madrid was weighed down by a crash in Banco Popular shares, which lost more than a fifth of their value after the bank asked shareholders to stump up more cash to clear up its balance sheet.
Wall Street followed Europe, opening a touch higher.
Rising oil prices boost the profits, revenues and share prices of energy companies and Asian stock markets were first to feel the benefit, with energy stocks in Europe and the US also attracting strong buying interest.
“Global markets have been fairly perky this Thursday...It is hard to pinpoint any singular reason behind the mild gains,” Spreadex analyst Connor Campbell said.
The markets were seeing “one of those quietly solid days where not a lot happens and investors are fine with that, consolidating the highs hit on Wednesday,” he said.
The weaker dollar also provided a shot in the arm to many commodities, in turn lifting the resources sector. The faltering greenback makes dollar-denominated commodities cheaper for buyers using stronger currencies, stimulating demand and prices.
In London, mining giants Glencore and BHP Billiton topped the gainers board, both rising around three percent, with peers Antofagasta and Anglo American not far behind.
“A slight backtracking of the US dollar has helped a rally across commodities and a positive read-across to UK mining shares,” said CMC Markets analyst Jasper Lawler.
The faltering greenback makes dollar-denominated commodities cheaper for buyers using stronger currencies, stimulating demand and prices.
Markets are now eyeing Group of Seven summit talks, which kicked off in Japan.
Topping the agenda is the sputtering global economy, although divisions are likely to remain over whether the world should spend or save its way out of the malaise, with Japan and Germany at odds on the issue.
There was also talk that the G-7 meeting may take a stance on alleged Chinese steel dumping, which has been the bane of steel producers around the world. In Paris, Arcelormetal shares surged nearly nine percent.
Britain’s referendum next month on whether or not to exit the European Union — in a so-called “Brexit” — was also on the G-7 agenda.
Also in sight is a speech by US Federal Reserve chair Janet Yellen at Harvard University Friday, as investors await fresh news about a possible US rate rise.
Traders had been beginning to adjust to news of a possible US interest rate hike come June or July, analysts said, viewing it as an indication of economic strength.
Global markets rise as oil breaks through $50
Global markets rise as oil breaks through $50
