Oil Prices Rise Further, Sterling Soars in the Wake of Carney’s Interest Rate Comments
June 13, 2014 6:45 am
European equity markets dropped Friday amid escalating violence in Iraq which drove up oil prices and pressured stocks on Wall Street overnight. On Thursday, the S&P 500 fell 0.7% while the VIX index rose by 9% in a reflection of uncertainty in the markets. Oil markets were in focus – Brent crude was above $113 a barrel, a level not seen for six months, as a result of the escalating tensions in the Middle East. Prospects of a civil war in Iraq – OPEC’s second-largest exporter – will keep oil prices uncomfortably high, although for the moment these tensions have been confined to the north of the country. The risk averse tone sees government bonds such as UK gilts and US Treasuries attracting demand from buyers. Meanwhile, Gold, which is traditionally seen as a safe-haven, was trading up $14 at $1,274 an ounce.
On Thursday, stock markets absorbed better euro zone industrial production data, with a shortfall in US retail sales disappointing the market, as well as data showing that US jobless claims rose last week. The risk tone was hit following the poor US releases but it’s the geopolitical tensions which are really eating away at risk sentiment with market participants now concerned that the US military could intervene after US President Barack Obama said he won’t rule out using airstrikes to assist Iraq’s government. In terms of subsectors, the Stoxx600 oil and gas index jumped 0.7% on the rise in oil prices, and both West Texas Intermediate oil and Brent were up nearly 1% in Europe early on Friday.
Overnight, Asian markets were mostly mixed. China and Hong Kong markets were positive after data showed China’s economy stabilised in May, with industrial production and retail sales data both up from April. China’s industrial output moved up narrowly, from a five-year low of 8.7% to 8.8%, while retail sales rose to 12.5% from 11.9%. Both the Hang Seng Index and the Shanghai Composite were up near 1%. However, Japan’s Nikkei 225 dropped 0.6% as the yen rose following the Bank of Japan’s policy meeting, in which the central bank held to its aggressive monetary policy, indicating an unwillingness to ease monetary policies further any time soon.
Meanwhile, in the UK, sterling climbed to $1.6973, extending previous session advances after the Bank of England Governor Mark Carney said the central bank may raise interest rates from a record low earlier than investors expect – his first hawkish comments since becoming governor almost a year ago. Carney also expressed concern about the growing debt related to the housing market, which could undermine the stability of the UK economy.
European equity markets dropped Friday amid escalating violence in Iraq which drove up oil prices and pressured stocks on Wall Street overnight. On Thursday, the S&P 500 fell 0.7% while the VIX index rose by 9% in a reflection of uncertainty in the markets. Oil markets were in focus – Brent crude was above $113 a barrel, a level not seen for six months, as a result of the escalating tensions in the Middle East. Prospects of a civil war in Iraq – OPEC’s second-largest exporter – will keep oil prices uncomfortably high, although for the moment these tensions have been confined to the north of the country. The risk averse tone sees government bonds such as UK gilts and US Treasuries attracting demand from buyers. Meanwhile, Gold, which is traditionally seen as a safe-haven, was trading up $14 at $1,274 an ounce.
On Thursday, stock markets absorbed better euro zone industrial production data, with a shortfall in US retail sales disappointing the market, as well as data showing that US jobless claims rose last week. The risk tone was hit following the poor US releases but it’s the geopolitical tensions which are really eating away at risk sentiment with market participants now concerned that the US military could intervene after US President Barack Obama said he won’t rule out using airstrikes to assist Iraq’s government. In terms of subsectors, the Stoxx600 oil and gas index jumped 0.7% on the rise in oil prices, and both West Texas Intermediate oil and Brent were up nearly 1% in Europe early on Friday.
Overnight, Asian markets were mostly mixed. China and Hong Kong markets were positive after data showed China’s economy stabilised in May, with industrial production and retail sales data both up from April. China’s industrial output moved up narrowly, from a five-year low of 8.7% to 8.8%, while retail sales rose to 12.5% from 11.9%. Both the Hang Seng Index and the Shanghai Composite were up near 1%. However, Japan’s Nikkei 225 dropped 0.6% as the yen rose following the Bank of Japan’s policy meeting, in which the central bank held to its aggressive monetary policy, indicating an unwillingness to ease monetary policies further any time soon.
Meanwhile, in the UK, sterling climbed to $1.6973, extending previous session advances after the Bank of England Governor Mark Carney said the central bank may raise interest rates from a record low earlier than investors expect – his first hawkish comments since becoming governor almost a year ago. Carney also expressed concern about the growing debt related to the housing market, which could undermine the stability of the UK economy.
Related Posts: