By Koh Gui Qing (Mon, October 11, 2021)
Oil prices surged on Monday to multi-year peaks, boosting U.S. materials and energy stocks, but fears that rising prices would exacerbate supply-chain snags caused Wall Street to give up early gains.https://bdaca05bcb204a105aa384e4eb6f8468.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html
Higher vaccination rates against the coronavirus have supported a revival in economic activity, helping Brent prices to gain for five weeks and U.S. crude for seven.
U.S. crude jumped 2.5% to $81.31 per barrel, a level not seen since late 2014, and Brent rallied 1.9% to $83.98. [O/R]
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Analysts are divided over whether energy supplies are tight enough to warrant oil testing $100 a barrel, but most seemed to agree prices are likely to stay elevated in the short-term.
Basic materials and energy stocks in the S&P 500 jumped 0.96% and 0.88% respectively, Refinitiv data showed, outperforming the broader market.
The Dow Jones Industrial Average pared early gains and was off 0.06%, the S&P 500 dipped 0.04%, and the Nasdaq Composite inched up just 0.09%.
The pan-European STOXX 600 index rose 0.05% and MSCI’s gauge of stocks across the globe gained 0.25%.
However, as U.S. companies enter the third-quarter earnings season next week, some analysts anticipate businesses reporting slowing growth due to supply-chain snags and rising prices. This could lead to a drop in U.S. stocks, some analysts warned.
“Whether the final chapter of the mid-cycle transition ends with a 10% or 20% correction in the S&P 500 will be determined by how much earnings growth decelerates or has to outright decline,” Morgan Stanley analysts said in a note.
“We are gaining confidence in a sharper deceleration but the timing is more uncertain.”
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Bets that rising prices would prompt major central banks to tighten monetary policy sooner rather than later pushed up bond yields and lifted the dollar to a near three-year peak against the Japanese yen.
In the United States, investors expect the Federal Reserve to begin tightening policy by announcing a tapering of its massive bond-buying next month. This has hobbled the yen, which is typically sensitive to interest-rate differentials.
The Japanese yen weakened 0.99% versus the greenback at 113.36 per dollar, while the dollar index rose 0.112%.
A stronger dollar pushed the euro down 0.01% to $1.1566. [USD/]
The benchmark 10-year U.S. Treasury yield climbed to 1.6118% from 1.605% late on Friday. Yields on the 2-year note also rose to 0.3198% from 0.318%. [US/]
Gold, usually seen as a hedge against inflation, was little changed, however, as a stronger dollar limited gains in bullion. Spot gold was steady at $1,756.26 an ounce. U.S. gold futures fell 0.03% to $1,755.80 an ounce. [GOL/]
In keeping with gains in the stock market, Bitcoin, a barometer of investors’ risk appetites, rose 4.71% to $57,292.92.