Global shares rise as slide in oil prices soothes some inflation fears, while bond yields retreat

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© Getty Images The sun sets over container ships and oil platforms off the coast of Huntington Beach. Getty Images

  • US stock futures edged higher, lifted by some investor relief over inflation, as oil skidded to six-week lows.
  • The US is trying to coordinate with other major energy consumers on releasing strategic crude stockpiles, Reuters said.
  • Government bond yields also edged lower, reflecting a degree of optimism over the inflation outlook.

Global equities rose Thursday as a drop in oil prices to six-week lows helped alleviate concerns about inflationary pressures, leaving government bond yields to ease back.

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US stock futures gained, signaling a stronger start to trading later in a day when investors will get a look at weekly employment data. Futures on the S&P 500 were up 0.3%, the Nasdaq 100 up 0.5%, and the Dow Jones up 0.2%.

Markets in Asia overnight were mixed, with Japan’s Nikkei initially gaining after reports the government will add another $490 billion in stimulus to support the economy. The index closed just 0.3% down.

Hong Kong’s benchmark Hang Seng fell 1.3%, lagging the Shanghai Composite’s 0.47% loss, after a 5.7% drop in Evergrande shares. The Chinese property developer booked a $1 billion loss on a firesale of its stake in streaming service HengTen Networks, as it scrambles to tackle its massive debt pile.

In Europe, the Stoxx 600 was broadly changed near record highs. The region has become the epicenter of the next wave of Covid-19 infections, and investors have punished equities. In the last week, Frankfurt’s DAX, Madrid’s IBEX, Milan’s FTSE Mib and Brussels’ Bel 20 have fallen between 1% and 1.8% as a result. 

“The fragmented nature of some of the moves we are seeing appears to suggest that while investors are encouraged in some part by the ability of companies to absorb some of the increases being seen through their supply chains, there is rising uneasiness about how long they will be able to do so,” CMC chief strategist Michael Hewson said.

“For all the increasing concern about rising inflationary pressure, bond yields slid back yesterday as markets try to establish how much of the current inflation surge is persistent, and how much is transitory, as well as the wider question of when the first increase in rates is likely to materialize,” he added.

Oil came under pressure after China said it would release some of its strategic reserves. That came after Reuters reported the US administration is pressing Japan and other major energy consumers to join it in coordinating a stockpile release as a means of lowering crude prices.

Brent crude futures were last down 0.2% at $80.00 a barrel, while West Texas Intermediate futures eased by 0.3% to $77.33 a barrel. 

“While a release from the SPR would only provide some short-term relief to the market, that may be all that is necessary, given the expectation that the global oil market could return to surplus as early as 1Q22,” ING strategist Warren Patterson said.

Meanwhile, government bonds gained modestly in price, pushing down yields. US 10-year Treasury notes were down 1 basis point at 1.596%, while German 10-year Bunds eased 2 basis points on the day to -0.257% and UK 10-year gilt yields fell 3 basis points to around 0.938%.

Coming up later in the session are weekly US jobless claims, which economists expect to have risen by 263,000 in the week to November 6, following the prior week’s 267,000 increase, according to Trading Economics.

First-time claims for unemployment are now hovering around their lowest since the onset of the pandemic in March last year. That underscores the US economy’s ability to generate jobs, even as inflation has soared to 31-year highs and the COVID-19 delta variant has pushed up daily case rates.

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