Global stock markets end in the green amid holiday mood on oil resurgence

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Photo used for illustrative purposes.

Global stocks rose in thinned holiday trading on Monday, helped by a rebound in oil as worries about tight supply outweighed fears of recession. European stocks rebounded 0.8% and Britain’s FTSE rose more than 1%, boosted by gains from oil and gas companies.

Oil fell $1 a barrel earlier on Monday on worries about the global economic outlook, but came back strong on data showing a drop in production from the Organization of the Petroleum Exporting Countries (OPEC), and on the unrest in Libya and the sanctions against Russia.

Ecuador’s oil production has recently been hit by unrest and a strike in Norway could reduce supply this week.

“This backdrop of growing supply disruptions is colliding with a potential shortage of spare production capacity among Middle Eastern oil producers,” said Stephen Brennock of oil broker PVM.

“And without new oil production hitting the markets soon, prices will be forced higher.”

Production from Opec’s 10 members in June fell 100,000 barrels per day (bpd) to 28.52 million bpd, from their promised increase of around 275,000 bpd, according to a Reuters survey. Brent crude jumped 1.25% to $113.02, while U.S. crude rose 1.2% to $109.76 a barrel.

The MSCI World Stock Index gained 0.38% after losing 2.3% last week.

Global stocks hit an 18-month low last month on concerns over rising inflation and interest rates, but have since made minor gains. MSCI’s broadest index of Asia-Pacific stocks outside Japan rose 0.34%.

Chinese blue chips closed 0.7% higher, helped by a 4.65% rise in Chinese healthcare stocks. Cities in eastern China tightened COVID-19 restrictions on Sunday amid new coronavirus clusters.

Japan’s Nikkei added 0.84%.

However, US S&P 500 and Nasdaq futures fell 0.4% and 0.5% respectively, with recent soft US data suggesting downside risks to this June payrolls report. week. US stock markets are closed Monday for Independence Day.

“Some markets are starting to find their footing, but there’s a lot of volatility right now,” said Sebastien Galy, senior macro strategist at Nordea Asset Management.

The Atlanta Federal Reserve’s now widely watched GDP forecast fell to -2.1% annualized for the second quarter, implying that the country was already in a technical recession.

Friday’s payrolls report is expected to show employment growth slowing to 270,000 in June, with average earnings slowing slightly to 5.0%.

Wednesday’s Fed policy meeting minutes are expected to appear hawkish, however, given that the committee opted to raise rates by 75 basis points.

The market expects about an 85% chance of another 75 basis point hike this month and rates at 3.25-3.5% by the end of the year.

But asset manager Nuveen sees room for optimism after the market fell sharply in the first half.

“The beaten public markets offer extremely compelling short-term upside potential,” its global investment committee said in its mid-2022 outlook on Monday.

Treasuries were closed, but futures extended their gains, implying that 10-year yields were holding around 2.88%, after falling 61 basis points from their peak of June.

Yields on 10-year German government bonds, the eurozone benchmark, rose 10 basis points to 1.328% after plunging last week as investors rushed to safe-haven bonds. Bond yields move inversely to price.

The US Dollar was down 0.06% at 104.99 against a basket of currencies, moving away from recent 20-year highs set on its safe haven status.

The euro gained 0.13% to $1.0442, moving away from its recent five-year low at $1.0349. The European Central Bank is expected to raise interest rates this month for the first time in a decade, and the euro could be lifted if it decides on a more aggressive half-point move.

The dollar gained 0.3% to 135.48 yen, after hitting a 24-year high of 137.01 last week.

A strong dollar and rising interest rates did not help non-performing gold, which fell 0.15% to $1,808 an ounce after hitting a six-month low at 1 $784 last week.

The euro and pound rose against safe-haven currencies on Monday, supported by improving global risk sentiment in a quiet trading session due to a US holiday.

European stocks and Britain’s FTSE stock index rallied on Monday, helped by gains by oil and gas companies. US markets are closed for Independence Day.

The British pound and euro gained ground against the US dollar, Japanese yen and Swiss franc.

The single currency rose 0.2% to $1.0440 against the dollar, but remained barely above May’s five-year low of $1.0349, while the pound rose 0 .4% to $1.2143 after hitting a two-week low at $1.1976 on Friday.

“The calm in trading to start the week sees the US dollar weaken against most major currencies as it reverses Friday’s gains,” said Shaun Osborne, chief currency strategist at Scotiabank.

Reports that the White House will announce an easing of some Chinese tariffs later this week in an effort to ease high inflation has helped to restore some optimism to markets, Osborne added.

But amid fears of a global recession, the euro remained near a five-year low against the dollar.

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