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Oil prices stabilise above 11-year low, lift shares, bond yields


Crude Oil

Crude Oil

Crude oil prices stabilised above 11-year low yesterday, on the back of prospects for lower temperatures on both sides of the Atlantic, lifting European stocks and euro zone bond yields.

The fall in oil prices has been a major driver of financial markets this year, hammering energy companies, lowering inflation expectations and reinforcing bets on loose monetary policy in Europe and a slow tightening in the United States.

U.S. West Texas Intermediate (WTI) futures were up by 21 cents at $37.02 per barrel, following a more than three per cent fall on Monday. Brent, the international benchmark, was at $36.82 per barrel, up by 20 cents, but still less than a dollar away from an 11-year low hit earlier in December.

This lifted shares in Europe, where the pan-European FTSEurofirst 300 index rose by 0.9 per cent, while the euro zone’s blue-chip Euro STOXX 50 index advanced by 1.3 per cent.

Britain’s blue-chip FTSE 100 index, opening for the first time since the Christmas break, rose by 0.4 per cent. It underperformed its European peers due to a fall in major mining stocks, which account for about five per cent of the FTSE’s market capitalisation.

Their poor performance came as London copper dipped for a second day and aluminum shed one per cent on concerns about demand from top consumer China.

Deutsche Bank shares also rose b 1.6 per cent, following its move to sell its 20 per cent stake in China’s Hua Xia Bank to insurer PICC Property and Casualty Co for up to 25.7 billion yuan ($4 billion).

Germany’s 10-year Bund yields, the benchmark for euro zone borrowing costs, rose by two basis points to 0.58 per cent and most other bond yields in the single currency region were up one to three basis points.

Spanish bond yields nudged down as differences between political parties made an anti-austerity leftist coalition look increasingly unlikely.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up by 0.1 per cent. But it remained on track to mark a loss of around 12 per cent for 2015, a year that saw it log a more than seven-year high in April.

China’s blue-chip CSI300 index added 0.9 per cent, while the Shanghai Composite Index closed up a similar amount, as the central bank vowed to maintain reasonable credit growth and keep the yuan stable.

China’s yuan fell to 6.5800 against the dollar in offshore trading, its weakest since a hefty devaluation in August, mirroring a fall in onshore rates, with traders citing strong year-end dollar demand.

The euro nudged up 0.1 per cent to $1.0980.

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