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A rebound in oil prices gives world stocks a lift in holiday trading

A man walks below an electronic screen showing Japan’s Nikkei stock price index in a conference hall on June 14, 2022 in Tokyo, Japan. REUTERS/Issei Kato

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  • Oil was steady after losing $1 a barrel in early trade
  • Nikkei rose 0.84%, Chinese shares rose 0.7%
  • FTSE up more than 1%, S&P futures down 0.7%
  • Payrolls slowed this week, Fed minutes looked hawkish

LONDON/SYDNEY, July 4 (Reuters) – A rebound in oil prices on concerns of tight supplies lifted global shares in the U.S. holiday session on Monday.

Oil rested as lower production from the Organization of the Petroleum Exporting Countries (OPEC), unrest in Libya and sanctions on Russia outweighed fears of a global recession.

“Oil fundamentals remain supportive,” said Warren Patterson, head of commodity research at ING.

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“Clearly OPEC is still struggling to hit its agreed output levels.”

Production from OPEC’s 10 members fell by 100,000 barrels per day (bpd) to 28.52 million bpd in June, an increase of about 275,000 bpd, a Reuters poll showed on Friday. Read more

Brent crude was steady at $111.59, while US crude was down 12 cents at $108.32 per barrel. Both fell below $1 in early trading.

The MSCI world equity index (.MIWD00000PUS) gained 0.25% and MSCI’s broadest index of Asia-Pacific shares Japan (.MIAPJ0000PUS) rose 0.14% after losing 1.8% last week.

Global stocks hit 18-month lows last month on worries about rising inflation and interest rates, but have since pared modest gains.

“Some markets are starting to find their footing but there is a lot of volatility right now,” said Sebastian Galli, senior macro strategist at Nordea Asset Management, pointing to risks from the release of key US non-farm payrolls data later this week.

European shares (.STOXX) rose 0.7% and Britain’s FTSE (.FTSE) rose more than 1%, helped by gains in oil and gas companies.

Chinese blue chips (.CSI300) closed 0.7% higher, boosted by a 4.65% rise in Chinese healthcare stocks (.CSIHCSI). Cities in eastern China tightened COVID-19 restrictions on Sunday amid new coronavirus clusters. Read more

Japan’s Nikkei (.N225) added 0.84%, though South Korea (.KS11) fell 0.22%.

US S&P 500 futures and Nasdaq futures fell 0.7% and 0.8% respectively, however, the latest soft US data pointed to downside risks for this week’s June payrolls report. US stock markets are closed on Monday.

Technological recession

The Atlanta Federal Reserve’s much-watched GDP Now forecast fell to an annualized -2.1% for the second quarter, indicating the country is already in recession.

Friday’s payrolls report forecast job growth slowed to 270,000 in June, with average earnings slowing a touch to 5.0%.

Minutes from the Fed’s June policy meeting on Wednesday are expected to sound hawkish, however, as the committee opted to raise rates by a super-sized 75 basis points.

The market has about an 85% chance of another hike of 75 basis points this month and pegs rates at 3.25-3.5% by the end of the year.

“But the market has moved to price in an increasingly aggressive rate cut profile for the Fed for 2023 and 2024, consistent with a recessionary growth opportunity,” analysts at NAB said.

“Fed cuts of around 60bps are now priced into 2023.”

Cash Treasuries closed lower but futures extended their gains, with the 10-year yield holding around 2.88%, having lost 61 basis points from their June peak.

German 10-year government bond yields, the euro zone benchmark, rallied 5 basis points to 1.276% after sinking last week as investors rushed into safe-haven bonds. Bond yields move inversely to prices.

Among currencies, investor demand for the most liquid safe haven benefited the US dollar, which was steady at a two-decade high against a basket of rivals at 105.09.

The euro was flat at $1.0425, not far from its recent five-year trough of $1.0349. The European Central Bank is expected to raise interest rates this month for the first time in a decade, and the euro could get a lift if it decides on a more aggressive half-point move.

The Japanese yen attracted safe-haven flows late last week, pushing the dollar back to 135.38 yen from a 24-year high of 137.01, though it was up 0.18% on the day.

A higher dollar and rising interest rates were not kind to unyielding gold, which was trading at $1,808 an ounce, down 0.13% after hitting a six-month low of $1,784 last week.

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Edited by Sam Holmes, Mr. Navaratnam and Ed Osmond

Our criteria: Thomson Reuters Trust Principles.

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