US, European stocks rise on higher oil, Fed speculation

 27 Jan 2016 - 9:07

US, European stocks rise on higher oil, Fed speculation

 

 

 


New York: US and European stocks rose Tuesday behind higher oil prices and speculation the US Federal Reserve will send a dovish signal on monetary policy on Wednesday.

The strong correlation between oil prices and global equities continued, with Asian shares faltering on lower oil prices early in the day, but Europe and New York rising with the rebound. 

"Oil prices continue to be the dominating driver of stock market direction," said market analyst Jasper Lawler at CMC Markets UK.

The US benchmark oil contract advanced $1.11 to $31.45 a barrel on the New York Mercantile Exchange. 

The gain came on talk of possible coordination Saudi Arabia and Russia to cut petroleum output, although some analysts expressed skepticism such a deal was near. 

Analysts also cited expectations that the US central bank will signal Wednesday a go-slow approach to future rate hikes after lifting benchmark interest rates in December for the first time in more than nine years.

The Fed is expected to release a policy statement Wednesday afternoon following a two-day meeting.

"There's some optimism ahead of the Fed tomorrow that we're going to hear some more dovish commentary and that future rate hikes will be data-dependent," said Michael James, managing director of equity trading at Wedbush Securities.

In the US, the S&P 500 closed 1.4 percent higher.

Paris advanced 1.1 percent, Frankfurt 0.9 percent and London 0.6 percent. 

Earlier, the Nikkei 225 lost 2.4 percent, while the Shanghai Composite Index tumbled 6.42 percent.

Still, analysts described a brittle trading environment, with worries about oil prices and weakening global growth continuing to hang over sentiment. 

JPMorgan Chase trimmed its year-end forecast for the S&P 500 from 2,200 to 2,000 due to expectations of slower US growth and stagnant corporate earnings.

"The risk-reward for equities is deteriorating," JPMorgan said.

Metals, oil shares gain

Petroleum-linked stocks rose across the globe, with Dow member ExxonMobil climbing 3.7 percent, France's Total rising 2.9 percent and Anglo-Dutch giant Royal Dutch Shell advancing 1.7 percent.

Companies linked to industrial metals also jumped, with London-listed miner Anglo American surging 11.8 percent, French steel company ArcelorMittal 7.2 percent and US aluminum producer Alcoa 5.0 percent.

German engineering giant Siemens surged 8.6 percent after lifting its 2016 profit forecast following a strong first quarter. The company said it expects moderate revenue growth this year, despite "further softening" in the global macroeconomy and rising geopolitical turbulence.

A stream of large US multinationals reported better-than-expected earnings, despite the drag of the strong dollar. Dow members Procter & Gamble, 3M and Johnson & Johnson all gained following their earnings reports.

AFP