Oil rebound hauls up
global stocks, commodity currencies
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[September 19, 2016]
By John Geddie
LONDON (Reuters) - Oil prices bounced
back from multi-week lows on Monday, hauling up world stock markets
and commodity-linked currencies, on hints that producers were close
to reaching an output deal.
Crude prices rose more than 1 percent, with U.S. futures bouncing
off Friday's one-month low to $43.63 and Brent climbing from a
two-week trough to $46.30 after Venezuela said producers could
announce a deal this month.
A firmer oil price bolstered energy company shares in bourses around
the world, allowing European stocks to climb after two straight
weeks of losses. Wall Street was set to open up around 0.5 percent
It also helped lift commodity-linked currencies including the
Canadian, Australian and New Zealand dollars by around half a
percent, while the U.S. dollar was broadly weaker.
Against a basket of other currencies, the greenback lost 0.2 percent
to 95.894, giving up some of Friday's gains which were the biggest
in a single day since late June. [FRX/]
"It is not the first time this year we have had hopes of a deal and
they have been dashed, but for now the oil rebound is supporting
certain markets," said Frederik Ducrozet, a senior economist at
The pan-European 600 index which had fallen to a six-week low on
Friday, rose 0.7 percent, with the STOXX Europe 600 Oil & Gas index
<.SXEP> advancing 0.8 percent. [.EU]
Emerging market shares <.MSCIEF> hit a one-week high, with Hungary
as the standout performer after a ratings promotion to investment
grade saw the Budapest share index jump to a nine-year high.
Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan
gained 1.2 percent in a move that was largely attributed to bets
that the U.S. Federal Reserve would skip a chance to raise rates at
a policy meeting this week.
Shanghai put on 0.5 percent, while Taiwan jumped 2.8 percent after a
string of losses. Liquidity was lacking, with Tokyo closed for a
A surprisingly large rise in U.S. consumer price inflation reported
on Friday seemed to add to the case for a hike and pushed the dollar
Yet most recent consumer and industrial activity data has
disappointed, leaving the market still pricing in only a 12 percent
probability of a rate rise this week, and 45 percent for December.
Assuming no move on policy, the focus will be on the FOMC's
forecasts for the funds rate, which this time extend to 2019.
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A man walks past at an electronic board showing the Japanese yen's
exchange rate against British pound (R) and Euro outside a brokerage
in Tokyo, Japan, July 6, 2016. REUTERS/Issei Kato
"They may use the extension to lower their expectations for rates in 2017 and
2018, so that they end up with the same terminal level of rates, but just take
longer to get there," said Marshall Gittler, head of investment research at
"In other words, a slower, more gradual pace of tightening. In that case, I
would expect the dollar to weaken."
There was little discernible market reaction to bombings in New York City and
New Jersey and a stabbing at a Minnesota shopping mall.
The Bank of Japan also meets this week and could well go in the opposite
direction by easing policy, though conflicting reports on what it might do have
stoked much uncertainty.
Sources have said the BoJ will consider making negative interest rates the
centerpiece of future easing by shifting its prime policy target away from base
Any steps that markets consider to be less than aggressive would be likely to
see the yen push higher and pressure the Nikkei <.N225>.
(Additional reporting by Wayne Cole in Sydney; Editing by Andrew Heavens)
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