Brent hits $70 per barrel before retreating; equities rise with energy

Doris Richards
January 13, 2018

Overnight, US stocks rose sharply to close at fresh record highs and Treasury yields fell after China dismissed media reports that officials have recommended slowing or halting purchases of US debt. It was on track for a more than 1.5 percent rise since Thursday - its strongest two-day performance since August.

Investors took the relatively hawkish statement as a signal that the European Central Bank will wind down its 2.55 trillion euro ($3.07 trillion) bond purchase scheme this year if Europe's economy continues to hum along, and that it will start moving towards interest rate hikes. The dollar weakened more broadly after USA data showed a rise in jobless claims and a decrease in producer prices.

With both the US Federal Reserve and the Bank of England now on policy tightening cycles, the ECB is, along with the Bank of Japan, among the few major central banks still to retain an overwhelmingly dovish policy stance with policy language such as "evolve gradually" and "lower for longer" still prevalent in its statements.

The euro jumped in value against the United States dollar after the minutes were released, gaining more than 0.8 per cent at the time of writing to hit highs of $1.2049, moving back towards three-year highs achieved at the start of the year.

The Bank of France raised its fourth-quarter growth forecast to 0.6% ( quarter-on-quarter from a previous forecast of 0.5%.

In the first eight trading sessions of the year, the pool of bonds with sub-zero yields has shrunk by about $1 trillion to $7.3 trillion, the smallest since July, signaling an uptick in growth and inflation prospects that's helping to normalize bond markets around the world.

Bitcoin was 4.8-percent lower at $14,168.95 on the Luxembourg-based Bitstamp exchange after South Korea's government said it plans to ban cryptocurrency trading. The Australian dollar rose to $0.7891, from $0.7842, but shied away from stiff chart resistance at $0.7900.

Dow Jones closed up by 0.80 percent, S&P 500 ended up 0.70 percent, Nasdaq finished the day up by 0.79 percent.

With euro zone output eliminating spare capacity this year, policymakers argued that no further easing in financial conditions was needed, and some even warned about the European Central Bank falling behind the curve.

Italy's 10-year government bond yield was down 8 basis points at 1.98 percent and the spread over the German equivalent was at its tightest since mid-December at 146 basis points at one stage. Surveys of confidence have surged and measures of activity are at multi-year highs. Spot gold added $5 (+0.4%) to trade near $1,322/oz.

U.S crude oil CLcv1 rose 50 cents to settle at $64.30 a barrel, while Brent LCOcv1 rose 61 cents to settle at $69.87.

Other reports by Iphone Fresh

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