Oil prices soared and stocks rebounded Monday on bargain-buying from last week’s blow-out, with traders riding a wave of optimism following pre-weekend Wall Street gains.
“Markets enter the new week with some renewed optimism, having ended the previous week’s tumultuous ride in positive fashion,” noted Interactive Investor analyst Richard Hunter.
“Although volatility is likely to persist given lighter summer volumes, the weakness which the markets endured for the majority of the previous trading sessions tempted some investors to buy on the dips.”
The gains were mirrored in oil markets, with both main contracts enjoying big gains of over five percent.
After having suffered heavy losses recently owing to concerns that the Delta variant of the coronavirus would impact demand as countries restrict people’s movements, investors were reassured by the fact China reported no new local Covid-19 cases on Monday for the first time since July.
Fears about the much more contagious variant have rattled world markets as it forces some governments to reimpose containment measures, which depresses demand for oil as people cannot travel.
“It is a good sign that there were apparently no new cases recorded over the weekend in China,” said Commerzbank analyst Carsten Fritsch.
Sentiment was also jolted last week by minutes from the US Federal Reserve’s July meeting indicating it could start withdrawing its vast financial support by year-end.
The colossal bond-buying programme and record-low interest rates have been a key pillar of the global recovery for more than a year, and the prospect of the cash being withdrawn has stalled that advance.
However, Dallas Federal Reserve chief Bob Kaplan, who is considered a policy hawk, suggested he could rethink his view to taper soon in light of the Delta variant’s global march, which is showing signs of hobbling economic growth.
The focus is now on Fed chief Jerome Powell’s speech to the Jackson Hole annual conference of central bankers and finance chiefs on Friday, with hopes for a clue about a taper timetable.
“The data in recent months have been fantastic but the outlook is becoming increasingly downbeat,” said OANDA analyst Craig Erlam.
“Jackson Hole looked the ideal platform for a taper warning, but now officials may be more inclined to see how the data unfold over the weeks before the September meeting before dropping any major hints,” he said.
– Bitcoin back above $50,000 –
Video: U.S. existing home sales climb for second straight month in July (Reuters)
Bitcoin topped $50,000 on Monday for the first time in three months after supportive news from payments giant PayPal and cryptocurrency platform Coinbase.
The world’s most popular virtual unit jumped to $50,440 during Asian trade, before easing to $50,350 in early morning London deals.
“Bitcoin continues its recent recovery… as PayPal announces plans to launch its cryptocurrency trading platform in the UK,” said AJ Bell analyst Danni Hewson.
PayPal will this week begin to allow users in Britain to buy, hold and sell cryptocurrency through the online payment platform for the first time.
– Key figures around 1530 GMT –
New York – Dow: UP 0.8 percent at 35,384.18 points
EURO STOXX 50: UP 0.8 percent at 4,182.37
London – FTSE 100: UP 0.3 percent at 7,109.02 (close)
Frankfurt – DAX 30: UP 0.3 percent at 15,852.79 (close)
Paris – CAC 40: UP 0.9 percent at 6,683.10 (close)
Tokyo – Nikkei 225: UP 1.8 percent at 27,494.24 (close)
Hong Kong – Hang Seng Index: UP 1.1 percent at 25,109.59 (close)
Shanghai – Composite: UP 1.5 percent at 3,477.13 (close)
Euro/dollar: UP at $1.1730 from $1.1698
Pound/dollar: UP at $1.3714 from $1.3623
Euro/pound: DOWN at 85.53 pence from 85.87 pence
Dollar/yen: UP at 109.84 yen from 109.78 yen
West Texas Intermediate: UP 5.6 percent at $65.61 per barrel
Brent North Sea crude: UP 5.5 percent at $68.73 per barrel