Crude oil boosts global stocks; dollar strengthens against euro – Gold price climbs to three-week high

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NEW YORK, April 12, (Agencies): Brent crude oil prices hit a four-month high on Tuesday after reports of an agreement among two major producers to freeze output, boosting energy stocks, even as the US dollar was having its strongest session in three weeks. Crude prices rose to bring gains over the past three sessions to more than 10 percent, after Russia’s Interfax news agency quoted a diplomatic source in Doha saying Russia and Saudi Arabia reached consensus about an oil output freeze ahead of a producers’ meeting on April 17.

On Wall Street, energy sector shares posted the most gains and the S&P 500 hit its highest level of the session shortly after the output freeze headlines.

The Dow Jones industrial average rose 156.04 points, or 0.89 percent, to 17,712.45, the S&P 500 gained 15.84 points, or 0.78 percent, to 2,057.83 and the Nasdaq Composite added 29.55 points, or 0.61 percent, to 4,862.95.

The FTSEurofirst index of 300 major European companies rose 0.6 percent, also led by energy names. MSCI’s gauge of stocks across the globe added 0.5 percent, its fourth gain in the past five sessions.

Earlier, Japanese shares rose 1.1 percent after a rally in the yen against the dollar stalled on Tuesday, lifting shares of exporters.

The US dollar also strengthened against the euro for only the third session in the last 12. The dollar index ticked up 0.13 percent, still its strongest session in three weeks.

Currencies of commodity-based economies like the Canadian dollar also rose. Against the greenback, the loonie hit its strongest level in nine months.

Brent crude was up 3.6 percent to $44.36 a barrel and US crude rose 3.3 percent to $41.70.

US Treasury yields rose as higher oil and global stock market gains reduced the safe-haven appeal of US government debt ahead of a $24 billion three-year note sale.

US

A surge in crude oil drove strong gains on Wall Street on Tuesday after a report that Russia and Saudi Arabia had agreed to freeze output ahead of a producers meeting on Sunday.

Oil prices rose more than 3 percent to their highest in five months after Russia’s Interfax news agency also reported that the final decision to freeze production will not depend on Iran.

The S&P energy sector rose 2.43 percent, leading all 10 major sectors higher. Chevron was up 2.3 percent and gave the biggest boost to the Dow.

“We have oil cooperating with the bulls today,” said Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey.

Bakhos added the US earnings season would set the tone for the stock market going forward for the next quarter of trading.

However, Alcoa’s lackluster first-quarter report marked a dull start to the season. The company’s shares were down 4.7 percent at $9.28.

Investors will focus on corporate earnings over the next several weeks, amid turbulent global markets and uncertainty surrounding the US Federal Reserve’s plan to raise interest rates.

S&P 500 companies are expected to post a decline of 7.8 percent in profit on average for the latest quarter, according to Thomson Reuters I/B/E/S.

The S&P 500 index has risen more than 12 percent from its low in February as oil rebounded and data suggested that the US economy was recovering.

Still, global risks remain a concern. The International Monetary Fund cut its global growth forecast for the fourth time in the past year on Tuesday, citing China’s slowdown and chronic weakness in advanced economies.

At 12:13 p.m. ET the Dow Jones industrial average was up 126.53 points, or 0.72 percent, at 17,682.94, the S&P 500 was up 12.97 points, or 0.64 percent, at 2,054.96 and the Nasdaq Composite was up 17.65 points, or 0.37 percent, at 4,851.05.

Juniper Networks sank 8.2 percent to $22.84 after the company estimated quarterly profit and revenue below analysts’ expectations.

Starbucks fell 3 percent to $59.06 after Deutsche Bank downgraded the stock to “hold” from “buy.”

sdaq recorded 23 new highs and 17 lows.

Europe

European shares rose on Tuesday at the end of a choppy session, helped by gains among mining companies, but Italy underperformed as its banks snapped a two-day winning streak.

The pan-European FTSEurofirst 300 index and the euro zone’s blue-chip Euro STOXX 50 index both rose around 0.6 percent.

The Italian banking index fell 3.7 percent, reversing initial gains as investors questioned the effectiveness of a state-orchestrated deal to create a fund to shore up weaker lenders.

“The problem with the Italian bank fund is that it is not big enough and it risks compromising the banks that are already in a much better shape,” said Francois Savary, chief investment officer at investment and consultancy firm Prime Partners.

Intesa Sanpaolo and UniCredit, the country’s two biggest banks, fell 5.2 and 4.2 percent respectively, sending the Milan blue chip index down 1.6 percent.

The two lenders are to contribute 1 billion euros each to the fund, according to a source cited by Reuters.

Luxury goods industry leader LVMH rose 1.5 percent, reversing initial losses triggered by first-quarter sales below forecasts.

The mining sector index rose 3.2 percent, making it the top sectoral gainer, supported by steady copper prices and encouraging economic signals from China.

The FTSEurofirst has fallen nearly 10 percent since the start of 2016 as concerns about a China-led global economic slowdown weigh on world stock markets.

But strategists at HSBC kept an “overweight” position on continental European equities.

“We continue to argue that Europe offers the best earnings story globally, although it has been disappointing so far, with the market being hurt by global growth concerns. We see a robust business cycle, policy support, and investor under-ownership,” they wrote in a note.

UK

UK shares advanced on Tuesday in choppy trade, buoyed by a rally in the energy sector after oil prices rose on a report that Saudi Arabia and Russia had reached agreement on output restrictions.

The FTSE 350 Oil and Gas index ended 1.5 percent higher, turning positive in the last two hours of trade.

Global oil prices hit fresh five-month highs on Tuesday, piercing $44 a barrel and extending earlier gains after a report that top producers Russia and Saudi Arabia had agreed to freeze output ahead of a much-anticipated producers meeting on Sunday.

Miners also rose, led higher by a 9.1 percent rise in Anglo American. The company said rough diamond sales during the third cycle of the year continued a reasonably positive trend.

The mining sector was up 4 percent, supported by steady copper prices and encouraging economic signals from China.

“Commodities have been rallying very strongly since about February … and that has obviously given miners a bit of a tailwind,” Ken Odeluga, market analyst at City Index, said.

The blue-chip FTSE 100 index was up 42.27 points, or 0.7 percent at 6,242.39 points by the close. Energy and materials shares contributed nearly 24 points to the index’s advance.

The top faller on the index was equipment rental company Ashtead Group, which dropped nearly 3 percent after investment bank HSBC downgraded its rating on the stock to “hold” from “buy” based on findings about the age of its fleet.

“Upon a closer examination, Ashtead’s fleet may not be materially younger than that of the peers, at least on a basis that matters commercially,” analysts at HSBC said in a note.

Intu Properties also suffered from a target price cut from Societe Generale, which sent its shares 1.7 percent lower.

Hospitality company Whitbread fell 2.3 percent after the boss of Costa, a chain of coffee shops which it operates, left the company.

Asia

A fall in the yen pushed Japan’s stock market higher Tuesday, helping it lead a broad Asia-wide advance, although analysts said worries about the world economy and earnings would temper any rally.

World markets have been unable to maintain momentum after their progress in March, with concern growing that central banks may be running out of tools to kick-start growth and inflation.

Tokyo’s Nikkei, which has been among the worst performers this year, enjoyed a rare rally Tuesday to add 1.1 percent, thanks to a dip in the yen, which supports exporters.

The dollar rose to 108.25 yen in Japanese trade, from 107.94 yen in New York, after Japan’s finance minister reiterated that officials could still intervene in forex markets to stem the yen’s steep rise.

The gains in Tokyo were followed across most of the region, with Hong Kong ending up 0.3 percent and Sydney 0.9 percent higher. Seoul, Singapore and Taipei were also in positive territory.

In opening exchanges in Europe, London and Paris rose 0.1 percent while Frankfurt added 0.5 percent.

However, Shanghai ended 0.3 percent lower after Monday’s climb, which was fuelled by upbeat inflation data that raised hopes China’s struggling economy may have turned a corner.

Hong Kong-listed CNOOC was up 0.6 percent and PetroChina was 1.2 percent higher, while in Tokyo Inpex was up 2.2 percent and JX Holdings 1.3 percent higher.

In Sydney, Rio Tinto and BHP Billiton each climbed more than two percent.

Key figures around 0820 GMT

Tokyo — Nikkei 225: Up 1.1 percent at 15,928.79 (close)

Shanghai — Composite: Down 0.3 percent at 3,023.65 (close)

Hong Kong — Hang Seng: Up 0.3 percent at 20,504.44 (close)

Oil

Global oil prices hit fresh five-month highs on Tuesday, piercing $44 a barrel and extending earlier gains after a report that top producers Russia and Saudi Arabia have agreed to freeze output ahead of a much-anticipated producers meeting on Sunday.

Brent crude rose by as much as 71 cents, or 1.6 percent, to touch $44 a barrel in the three minutes after the report was released around 10:30 am EDT (1430 GMT).

By 11:17 am EDT (1523 GMT), prices extended those gains and were up $1.28, or 2.9 percent, at $44.06 a barrel.

US crude was up $1.09, or 2.68 percent, at $41.45 a barrel, just shy of $41.58, its highest since March 22.

Oil markets were already boosted ahead of the much-anticipated meeting between members of OPEC plus outside producers in Doha, Qatar, on Sunday to discuss freezing output, but the comments fueled hopes that oil producers will agree on steps to tackle a supply glut.

Gold

Gold rose to three-week highs on Tuesday as the dollar sank back to a near 8-month low, weighed down by expectations that the Federal Reserve will keep US interest rates lower for longer.

The US currency has been on the back foot since Fed Chair Janet Yellen last month doused expectations for near-term hikes in US interest rates, lifting dollar-priced assets, such as gold.

Spot gold touched a high of $1,262.60 an ounce before easing back to $1,258.26 by 1350 GMT, little changed from late on Monday. US gold futures for June delivery were up $2.60 an ounce at $1,260.60.

Silver also broke above $16 an ounce for the first time in nearly a month, peaking at a 5-1/2 month high of $16.19 before edging back to $16.07, up 1.2 percent. The metal rose 3.6 percent on Monday, its biggest one-day rise in over six months.

The bullion prices are being driven by the poor performance of the dollar and of stock markets, Afshin Nabavi, head of trading at MKS in Switzerland, said, with silver driving the market.

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