Oil surges 2.5%, soothes cyber nerves

Oil surges 2

LONDON (May 15): A bounce in oil and other commodities prodded stock markets higher on Monday, cushioning the hit to sentiment from a successful missile test by North Korea and a cyber attack that locked 200,000 computers in more than 150 countries.

In Europe, another victory for Angela Merkel’s conservatives in a regional election in Germany also helped share indices in London, Frankfurt and Madrid inch higher in early trade.

Saudi Arabia and Russia, the world’s two top oil producers, said an output cut needed to be extended for a further nine months until March 2018 to rein in a global crude glut.

That drove a roughly 2.5% rise in oil prices, and spurred gains for copper and iron ore and in commodity-linked currencies including the Australian and Canadian dollars and Russia’s rouble.

At a time when policymakers are wondering if they have successfully got consumer prices moving upward again, oil has been rising steadily for two weeks and may again start to boost headline rates of in the months ahead.

“This recovery in the oil and gas sector could well continue this morning on reports that Saudi Arabia and Russia have agreed to do ‘whatever it takes’ to keep a floor under oil,” said Michael Hewson, chief market analyst with CMC Markets in London.

“(That) has prompted oil prices to extend last week’s gains.”

The gains for European stocks were neither large nor across the board, however, with Paris shares drifting lower.

The past fortnight has seen the emergence of some broad concerns over the pace of economic growth in the United States and , and US data on Friday was read as weak.

As European markets got going on Monday, US Treasury yields gained less from the oil bounce than their German equivalents.

“The shadow of Friday’s softer US CPI and retail sales data hangs over markets this morning,” Societe Generale analyst Kit Juckes said in a note to clients.

“The inability of the dollar to gain more … reflects the changing global landscape as recovery elsewhere drives rates and yields a bit higher. With a thin US data calendar, there’s not much to propel yields or the dollar back up.”

Earlier, Asian stock markets shrugged off worries over the ‘ransomware’ cyber attack to reach a two-year high. Hong Kong shares gained 0.9% and their mainland equivalents 0.4%, after Beijing soothed market fears of tighter regulation saying bank risks were “completely controllable.”

Source: The Edge Markets

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