shares fall before oil recovers, Wall St. to dip at open
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[March 21, 2016]
By Nigel Stephenson
LONDON (Reuters) - A stronger dollar and
weaker oil prices weighed on European shares on Monday, though gains in
Chinese equities and a benign U.S. interest rate outlook brightened
At the start of a week shortened by the Easter break, the
pan-European FTSEurofirst stock index moved in and out of
positive territory after Asian shares eked out small gains.
U.S. shares looked set to open marginally lower, according to index
Brent crude fell more than half a dollar a barrel early in the day
as a rise in the number of active oil rigs highlighted the supply
glut that saw prices fall from above $100 in mid-2014 to lows around
$27 earlier this year.
Losses were later reversed and it last traded at $41.29, 9 cents
higher on the day and up 50 percent from 2016 lows.
"Dollar strength that might reverse and a production freeze that
might turn out to be an empty vessel are not the strongest
foundations on which to be long oil at $40 a barrel," PVM Oil
Associates' David Hufton said.
The dollar, recovering further after falling last week when U.S.
Federal Reserve policymakers revised down the number of times they
expect to raise interest rates this year to two from four, edged up
against a basket of currencies.
Sterling was a notable faller in the currency market. Traders cited
concerns over splits in the ruling Conservative Party over last
week's budget and a referendum on Britain's European Union
membership, after a pro-"Brexit" minister quit on Friday over
The FTSEurofirst 300 index fell 0.2 percent. While shares in
oil and gas companies and basics resources firms were both down 1.6
percent, Telecom Italia was a standout gainer, rising 3.8 percent
after the company said Chief Executive Officer Marco Patuano was
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.1
percent after entering positive territory for the first time this
year on Friday. However, shares in Australia and South Korea fell.
Chinese stocks rose. The CSI 300 index of the largest listed
companies in Shanghai and Shenzhen closed up 2.4 percent while the
Shanghai Composite gained 2.2 percent.
China's state margin lender, the China Securities Finance Corp, said
it would resume some short-term lending after suspending parts of
its business 18 months ago. It also cut brokerages' borrowing costs.
"It's a clear signal that regulators are ready to provide the market
with easier, and cheaper funding," said Wang Yu, analyst at Pacific
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Top Chinese officials said on Sunday the economy was showing signs
of improvement while capital outflows from the country were
Perceptions of how Chinese authorities are handling an economic
slowdown have been big drivers of financial markets in recent
months, along with gyrations in the oil price and the outlook for
U.S. interest rates.
EURO TICKS UP
The euro strengthened 0.1 percent to $1.1275 while the yen held
steady at 111.39 per dollar.
Sterling fell 0.6 percent to $1.4393, pummeled after the
resignation of eurosceptic Work and Pensions Secretary Iain Duncan
Smith heightened worries over divisions in Prime Minister David
Cameron's government before the June 23 referendum.
"Sterling does not normally react strongly to UK politics so this is
probably due to Brexit," said Richard Benson, head of portfolio
investment at currency managers Millennium Global in London. "The
referendum is just making people focus on issues like this a lot
Yields on low-risk German government bonds fell. Ten-year yields
were last down 1.5 basis points at 0.21 percent.
Gold fell as the dollar held firm. It last traded at $1,245.66 an
(Additional reporting by Saikat Chatterjee in Hong Kong, Patrick
Graham and Amanda Cooper in London; Editing by Catherine Evans)
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