Oil recovery helps shares, currencies eye G7

LONDON - Oil prices bounced back from near six-month lows on Thursday, dragging oil shares higher in their wake, while major currencies were marooned before a G7 meeting this weekend and bonds sat tight before US data.

By (Reuters)

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Published: Thu 14 Sep 2006, 4:54 PM

Last updated: Sat 4 Apr 2015, 4:21 PM

Bargain-hunting and supply concerns as the US renewed its push for immediate sanctions against Iran lifted oil above $64 and snapped a 12 percent, seven-session slide, its longest losing streak in three years.

US light crude for October delivery was up 58 cents at $64.55 a barrel by 0724 GMT after rising 21 cents on Wednesday.

Firmer oil and mining stocks bolstered European stocks. The pan-European FTSEurofirst index of 300 leading shares was up 0.4 percent at 1,375.48 points, its highest in over a week.

Asian shares were also firmer. Tokyo’s Nikkei closed up 1.22 percent, leading major regional markets higher.

“Japan has been a laggard over the past few sessions and investors reckon it’s time to catch up,” said Soichiro Monji, chief strategist of equity management at Daiwa SB Investments.

But action in other markets was muted with a welter of reasons for doing nothing for the time being.

The foreign exchange market had its eyes fixed firmly on the weekend, though with speculation on whether the low yielding yen will become a focal point when the Group of Seven finance ministers meets in Singapore this weekend.

A German finance ministry official said last week that the yen’s recent weakness would be discussed, spurring a rally in the Japanese currency, but analysts were sceptical that the meeting would have a decisive impact.

“I don’t think whatever we hear out of the G7 will be significant enough to have a major impact on the yen, apart from maybe a knee-jerk reaction,” RBC currency strategist Tania Kotsos said.

Waiting for fed

The euro was a touch weaker against the dollar at $1.2681 by 0753 GMT, while the dollar stood at 117.69 yen -- broadly steady on the day. The euro was flat at 149.21 yen.

A majority of top foreign exchange analysts and strategists polled by Reuters last week predicted the G7 finance ministers would not change their language on currencies in Singapore and stick to the April call for more flexible rates.

Markets were also awaiting US retail sales figures for August, due at 1230 GMT, and consumer price figures on Friday which are expected to give markets a steer on the likelihood or otherwise of another US interest rate rise next week.

Retail sales are forecast to dip 0.1 percent in August, mainly due to weak auto sales during the month. Excluding autos, sales are seen rising 0.3 percent after having posted a solid 1.0 percent advance in July.

US bonds were in limbo before the figures. Benchmark 10-year notes were flat, yielding 4.765 percent, while two-year notes were virtually unchanged at 4.806 percent.

Fed officials have said this week they have a bias toward raising rates further to keep a lid on inflation pressures after pausing a two-year credit tightening campaign at 5.25 percent in August.

The International Monetary Fund warned, however that the risks to the US economy were slanted to the downside. In its World Economic Outlook released on Thursday, it cut its 2007 US growth forecast to 2.9 percent from 3.3 percent on expectations that consumer spending and housing investment will slow further.

It said the global economy was set for another year of strong growth, but warned rising inflationary pressures and a US economic slowdown posed growing dangers.

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