By September 12, 2016 Read More →

Oil prices Monday rise as Wall St rallies, markets reassess Fed action

oil-prices-upCrude oil prices turned positive, with traders citing a weaker US dollar and stronger US stocks

By Rodrigo Campos

NEW YORK (Reuters) – U.S stock prices rose on Monday after Federal Reserve policymakers expressed caution about the need to raise U.S. interest rates, sharply cutting into losses in European equities, but Asia finished lower, tracking Wall Street’s large decline on Friday.

Shell photo.

Shell photo.

The U.S. dollar fell as the Fed was seen less likely to raise rates next week.

Federal Reserve officials had raised the chances of another interest rate rise this year in the past few weeks and the European Central Bank and Bank of Japan also refrained from further monetary policy easing recently, culminating in Friday’s broad stocks sell-off and rise in bond yields.

But U.S. stocks began to recover Monday morning after Atlanta Federal Reserve Bank president Dennis Lockhart said current economic conditions warrant a “serious discussion” of whether to raise interest rates at next week’s Fed meeting, also telling reporters there was no urgency to act.

“Lockhart helped assuage fears that a rate hike in September was imminent,” said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.

Stocks hit session highs after Federal Reserve governor Lael Brainard, expected last week by some to abandon her stance and open the door to higher rates, said Monday the Fed must be careful not to remove stimulus too quickly.

Brainard used the plural “months” for how much more data she wants to monitor, a key suggestion according to Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.

“This doesn’t mean November isn’t in play, but you’d be hard pressed to still believe a September hike is in the offing,” he said.

The Dow Jones industrial average rose 193.26 points, or 1.07 percent, to 18,278.71, the S&P 500 gained 25.56 points, or 1.2 percent, to 2,153.37 and the Nasdaq Composite added 68.37 points, or 1.33 percent, to 5,194.28.

A gauge of equities across major markets turned positive following Brainard’s remarks after having lost 1 percent earlier in the session. It recently traded flat on the day. European stocks ended down 1 percent, cutting an earlier loss in half.

The U.S. dollar hit a session low against the euro and yen as Brainard’s remarks further cut into expectations of a tightening move from the Fed.

The greenback was last down 1 percent against the yen at 101.69 yen and was down 0.2 percent against the euro at $1.1253.

The benchmark U.S. Treasury yield turned higher mid-session Monday and hit a session high of 1.697 percent, the highest since late June.

In commodities markets, crude oil prices turned positive, with traders citing a weaker U.S. dollar and stronger U.S. stocks.

Brent crude futures were up 0.7 percent at $48.35 a barrel, having recovered from a session low of $46.90, while U.S. crude rose from an intraday low of $44.72 to trade at $46.27, up 0.85 percent.

The biggest fall in U.S. crude oil inventories since 1999 last week, together with hopes for a deal between Saudi Arabia and Russia on stabilizing crude output at this month’s OPEC meeting, have helped to support oil prices in the past week.

Adding to Monday’s jittery markets mood, U.S. Democratic presidential candidate Hillary Clinton fell ill at a Sept. 11 memorial ceremony and had been diagnosed with pneumonia.

Investors and traders have generally assumed Clinton would win the presidency and have not truly considered the implications, both economic and for national security, should her rival Donald Trump prevail. (Reporting by Rodrigo Campos in New York; Additional reporting by Sam Forgione, Barani Krishnan and Karen Brettell; Editing by James Dalgleish)

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