Share this story!            

Shares up as oil cools, dollar extends gains

LONDON: Oil prices eased from record highs on Tuesday, boosting shares in Europe and Asia, and the dollar was at its strongest levels in months due to an increasingly hawkish US interest rate outlook.

Allied Domecq stood out among Europe’s share gainers after the British drinks group said it was discussing a possible takeover bid by Pernod Ricard.

US crude oil futures slid to around $56.60 a barrel from Monday’s all-time high of $58.28 as speculators took profits following year-to-date gains of more than 30 percent, encouraged by the prospect of rising US crude stocks and OPEC supplies. Traders said the underlying trend was still bullish. “$60 is still within easy reach, all we need are some bad US inventory figures or a refining outage,” said David Thurtell, a commodities strategist at Commonwealth Bank of Australia in Sydney.

The dollar hit a five-month high against the yen of 108.89 and a two-month peak versus the euro of $1.2806 as traders latched onto the idea that an inflation-wary Federal Reserve might tighten more aggressively. A speech from Fed chief Alan Greenspan due at 1850 GMT, on energy, was seen offering potential clues on the likely direction of US monetary policy.

“Cyclical factors are very heavily in the dollar’s favour at the moment and many people are anticipating Greenspan to sound more hawkish,” said Adam Cole, senior currency strategist at RBC Capital Markets.

The yield differential on the US currency was seen increasing, with base rates currently at 2.75 percent in the United States, 2.00 percent in the euro zone and virtually zero in Japan, and the Japanese and euro zone economies too weak to support rate rises.

The weaker euro weighed on bonds and boosted benchmark euro zone yields after these fell to a 6-week low on Friday on data which cast a cloud over regional growth prospects following a near-recession in 2004. Yields on 10-year euro zone government bonds were at around 3.60 percent. Comparable US Treasuries yielded around 4.48 percent, largely unchanged on late New York levels, as traders awaited Greenspan.

Services PMIs: Figures showing flat growth in the euro zone’s services sector did little to improve the region’s gloomy prognosis and showed new business growth slowing.

“Clearly, economic activity is currently faltering again across the region, after some modest signs of improvement around the turn of the year,” Howard Archer, and economist at Global Insight said.

The European Commission and European Central Bank have both cut their growth forecasts for the euro zone to 1.6 percent in recent weeks. However there was more upbeat news out of Britain, the biggest European economy outside the euro zone, after data showed activity in its services sector accelerating in March to its fastest pace in almost a year. reuters

Home | Business

Share this story!