📈 69% of S&P 500 stocks beating the index - a historic record! Pick the best ones with AI.See top stocks

GLOBAL MARKETS-Dollar dives, helping boost oil; Dow, S&P gain

Published 04/02/2016, 08:25 am
Updated 04/02/2016, 08:30 am
© Reuters.  GLOBAL MARKETS-Dollar dives, helping boost oil; Dow, S&P gain
EUR/USD
-
US500
-
DJI
-
FORTUM
-
KPN
-
LCO
-
CL
-
IXIC
-
US10YT=X
-
FTEU3
-
MIWD00000PUS
-
DXY
-

* U.S. dollar hits lowest level vs euro since Oct

* Wall St closes higher after late-day rally

* European shares end lower on U.S data, weak earnings

* Oil bounces 8 pct as dollar tumbles

* 10-year Treasury yields fall to 1-year low before recovering (Adds close of U.S. markets)

By Lewis Krauskopf

NEW YORK, Feb 3 (Reuters) - The U.S. dollar tumbled on Wednesday after comments from a Federal Reserve official and a soft services sector report suggested a slowing pace of rate hikes, sparking a rally in oil prices that also boosted U.S. equities.

U.S. crude settled up 8 percent as the weakness in the dollar helped oil and other commodities priced in the currency. U.S. Treasury yields fell to one-year lows before recovering.

The Dow Jones industrials closed up 1.1 percent, helped by oil stocks, in a volatile day which saw the key index sway in a 420-point range.

"The 8-percent rise in oil and the weakening dollar are the two things that seem to be kind of winning the day in terms of finally moving stocks into the plus side," said Chuck Carlson, chief executive at Horizon Investment Services in Hammond, Indiana.

The Dow Jones industrial average .DJI rose 183.12 points, or 1.13 percent, to 16,336.66, the S&P 500 .SPX gained 9.5 points, or 0.5 percent, to 1,912.53 and the Nasdaq Composite .IXIC dropped 12.71 points, or 0.28 percent, to 4,504.24.

Activity in the vast U.S. services sector slowed to a near two-year low in January, suggesting that economic growth weakened further at the start of the first quarter even as the labor market remains resilient. pan-European FTSEurofirst 300 index .FTEU3 fell 1.6 percent amid disappointing earnings from Finnish state-controlled utility Fortum FUM1V.HE and Dutch telecoms group KPN KPN.AS . 46-country All World share index .MIWD00000PUS was flat.

Equities have been tightly correlated with oil in recent weeks as the commodity's 1-1/2-year slide has deepened, with investors worried oil's slide is a sign of shakiness in the global economy.

Oil rose Wednesday after investors took advantage of a drop in the U.S. dollar and earlier weakness in the crude price, despite weekly data showing a surprisingly large rise in U.S. inventory. Russia also repeated its willingness to take part in talks with OPEC producers to cut output. crude CLc1 settled up 8 percent at $32.28 a barrel, while benchmark Brent crude LCOc1 settled up 7.1 percent to $35.04 a barrel.

"We're getting the rally in crude oil from the pounding that the dollar is taking," said Robert Yawger, senior vice president of energy futures at Mizuho Securities USA.

Financial conditions have tightened considerably in the weeks since the Fed raised interest rates and monetary policymakers will have to take that into consideration should that phenomenon persist, William Dudley, president of the Federal Reserve Bank of New York, told MNI in an interview. comments, combined with the services sector data, raised skepticism about the Fed's ability to further raise rates, weighing on the dollar.

According to CME FedWatch, the probability of a Fed rate hike by December is now down to just 39 percent.

"Fed rate forecasts are coming under fire," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington, in reference to Fed policymakers' December forecast of four rate hikes this year.

The dollar .DXY fell 1.7 percent against a basket of currencies - its biggest single session loss in two months - while also touching a three-month low. The euro EUR= gained 1.8 percent against the dollar and hit its highest level since October.

Benchmark 10-year note yields US10YT=RR were last down 6/32 in price to yield 1.8826 percent. At one point, yields fell below technical resistance to a low of 1.7930 percent, the lowest since February 5, 2015.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.