Global optimism lifted equity markets yesterday, fuelled by oil breaking through $50 for the first time this year, but Wall Street drifted lower on profit-taking.
Higher oil prices boosted 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.
But gains were curtailed by profit-taking as oil retreated late in the European afternoon, and pending G7 developments and any hints on the next US rate move.
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,” Spreadex analyst Connor Campbell told AFP.
In Europe, Frankfurt, London and Paris extended Wednesday’s gains that were won on the back of a financing deal for Greece, bright German data, easing Brexit concerns and firmer oil prices.
London’s FTSE 100 was up 0.04 % at 6,265.65 at close; Frankfurt’s DAX 30: rose 0.7 % at 10,272.71, while Paris’ CAC 40 gained 0.7 % at 4,512.64. The EURO STOXX 50 gained 0.3 % at 3,070.62.
But Madrid was weighed down by a crash in Banco Popular shares, which lost more than a quarter of their value in a single session after the bank asked shareholders to stump up more cash to clear up its balance sheet.
Wall Street initially followed Europe higher, but then dipped as financial stocks turned negative after big gains over the last two sessions.
Shares in JPMorgan Chase, Citigroup and Bank of America were all down after strong rises Tuesday and Wednesday supported helped the overall market rally.
By the European close oil had fought shy again of the psychologically important $50 level, with Brent North Sea crude futures easing to $49.67 against the day’s high of $50.51, and US contract West Texas Intermediate (WTI) at $49.47, off the day’s $50.21 peak.
The weaker dollar meanwhile 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 giant Glencore topped the gainers board, rising nearly 3%. “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.
Markets are now eyeing G7 summit talks, which kicked off yesterday 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 G7 meeting may take a stance on alleged Chinese steel dumping, which has been the bane of steel producers around the world.
Arcelormetal shares surged over 7%.
Britain’s referendum next month on whether or not to exit the European Union – in a so-called “Brexit” – was also on the G7 agenda.
Also in sight is a speech by Federal Reserve chair Janet Yellen at Harvard University today, 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.