Stocks Gain as Oil Recovers Ground
June 06 2019 - 06:13AM
Dow Jones News
By Paul J. Davies
European stocks shrugged off a weak performance in Asia to post
gains on Thursday, while oil prices recovered some ground after
falling into a bear market in the previous session.
The Stoxx Europe 600 gained 0.6% in opening trade. Germany's DAX
ticked up 0.5% while the U.K. FTSE 100 climbed 0.7%.
U.S. oil prices had dropped more than 22% below their April peak
in recent days as global-growth worries that have gripped financial
markets were compounded by fears of a supply glut. However, WTI
rebounded Thursday, rising 0.75% at $52.07 on Thursday, while
global benchmark Brent crude was 0.82% higher at $61.12.
The collapse of merger talks between Renault and Fiat Chrysler
hit shares of both companies. Renault was hit hardest, tumbling
7.8%, while its existing partner Nissan was down 1.7%% in Japan.
Fiat Chrysler shares slipped 0.32% in Italy, but Renault's French
rival Peugeot SA was up 2% on hopes that it may get a tie-up with
Fiatt instead.
Fears about the impact of President Trump's various standoffs
with the U.S.'s leading trade partners on the health of the global
economy have hurt stock markets in recent weeks. But U.S. indexes
extended a rebound on Wednesday, with the S&P 500 rising 0.8%,
that came after the Federal Reserve signaled it could cut rates to
boost economic growth and the central bank's "beige book" reported
modest growth in April and May.
That momentum didn't carry over into Asian markets Thursday.
Shares in Shanghai were down 1.2%, while those in Tokyo were
flat.
U.S. futures pointed to opening gains on Wall Street on Thursday
of more than 0.2% for both the Dow Jones Industrial Average and the
S&P 500.
The U.S. and Mexico were set to enter the second day of
negotiations on Thursday that could avert tariffs being imposed on
the Central American country. President Trump's spat with Mexico is
likely to mean an immediate spike in car prices, according to some
economists, which are one of the biggest exports into the U.S. from
its southern neighbor. That, in turn, would hurt demand.
"While the exact price elasticity of vehicle demand is hard to
quantify, it is possible to imagine a 25% tariff bringing down
overall vehicle demand by 3m+ units, or an 18%+ reduction," said
Emmanuel Rosner, an economist at Deutsche Bank.
As stock markets have been hit by growth fears, government bond
prices have rallied and yields declined. That continued Thursday
with the U.S. 10-year Treasury yield falling further to 2.102% from
2.119%, while the German bund was also more deeply negative at
minus 0.233% despite data showing growth in industrial orders in
April in the country.
Italian yields also fell despite the decision by European
authorities to declare that the country is in breach of its debt
reduction agreements, which could heighten political tensions
between the country and the bloc. Italian 10-year yields were down
to 2.443% from 2.489%.
Gold rose 0.2% to $1,336.50 an ounce.
Write to Paul J. Davies at paul.davies@wsj.com
(END) Dow Jones Newswires
June 06, 2019 05:58 ET (09:58 GMT)
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