US stocks rally as oil price retreats from recent high

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Global stocks rose on Thursday, helped by a drop in oil prices and falling Treasury yields ahead of highly anticipated US and eurozone inflation data.

Brent crude fell 1.2 per cent to settle at $95.38 per barrel, having earlier risen above $97 a barrel to its highest level since November. US marker West Texas Intermediate lost 2 per cent to $91.71.

Wall Street’s benchmark S&P 500 gained 0.6 per cent, while the technology-focused Nasdaq Composite rose 0.8 per cent in choppy trading in New York.

The price of Brent crude had been heading towards $100 a barrel in recent weeks on concerns over global supply, which were stoked on Wednesday after a weekly US government report indicated stockpiles at a critical delivery hub fell further.

Crude prices have risen 35 per cent since June after some of the world’s biggest producers announced supply cuts to last until the end of this year, adding to investors’ concerns over persistent inflation.

“The biggest question mark for the inflation outlook is the evolution of fuel prices,” said Wouter Thierie, an analyst at ING.

“The danger . . . is that if oil prices stay high for longer, companies will increasingly pass on these higher fuel prices, causing it to trickle down to core inflation again.”

Treasury yields, which rise when prices fall, have leapt this month as investors predict the Federal Reserve will keep rates high for a prolonged period to combat inflation. However, the yield on the benchmark 10-year note slipped back 0.04 percentage points on Thursday to 4.57 per cent.

European bond markets, in contrast, continued to be affected by concerns about high interest rates, along with worries about anaemic growth and a widening budget deficit in Italy.

The yield on the 10-year German Bund, a regional benchmark in Europe, rose 0.09 percentage points to 2.93 per cent, having hit its highest level since 2011.

Yields on the 10-year UK gilt was up 0.13 percentage points at 4.48 per cent on Thursday.

European stocks were more positive, with the continent-wide Stoxx Europe 600 index rising 0.4 per cent to end a five-day losing streak. France’s CAC 40 advanced 0.6 per cent and Germany’s Dax gained 0.7 per cent.

The euro advanced 0.6 per cent to trade at $1.056, edging up from a nine-month low.

Investors are turning their attention to closely watched US inflation figures due out on Friday. The “core” PCE index, often considered to be the Fed’s preferred inflation measure, is expected to have risen 3.9 per cent year on year in August, down from 4.2 per cent in the previous month.

German data on Thursday showed inflation slowing more sharply than expected to its lowest level in two years, while figures from Spain also came in below expectations. Eurozone inflation data is also due to be published on Friday.

The European Central Bank at its last meeting raised interest rates to an all-time high of 4 per cent and signalled that its historic campaign had probably drawn to a close, unless surprises in the price data push policymakers towards further action.

“Today’s and tomorrow’s inflation figures are likely to be scrutinised by a data-dependent ECB and play a central role in the next interest rate announcement in October,” said Pia Fromlet, euro area economist at SEB.

In Asia, Hong Kong’s Hang Seng index gave up 1.4 per cent, hitting its weakest level in 10 months, while China’s benchmark CSI 300 lost 0.3 per cent. Japan’s Topix fell 1.4 per cent.

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