Oil is near $72 a barrel Thursday as the South African rand holds at its best level since 2019 with most Asian stocks climbing and U.S. equity contracts steady, weathering the latest twist in the U.S.-China relationship as well as comments from the Federal Reserve on a potential reduction in stimulus.
South Africa’s rand broke past the R13.50/$. after gaining 1.73% against the dollar in overnight trade, its best performance in three months and holding at a level last seen in February 2019. However, the Nigerian Naira which is finding no support was quoted for N493/$ on AbokiFx which is a respectable mirror of trades on the autonomous market.
Brent crude is trading at $71.76 a barrel, up 0.57% in early trading. West Texas Intermediate crude was at $69.29 a barrel, up 0.7%. The oil market continues to be shaped by positive sentiments indicating a rise in demand globally.
Optimism over the vaccine rollout boosted Japanese equities, while Hong Kong retreated. China’s shares edged up despite President Joe Biden’s plans to amend a U.S. ban on investments in companies linked to the Chinese military, which may expand scrutiny to a wider set of enterprises. S&P 500 and Nasdaq 100 futures were slightly in the green after modest gains for both benchmarks, and European contracts were also a touch higher.
Ten-year U.S. Treasury yields held below 1.60% and a dollar gauge ticked higher. Traders took in their stride comments from Philadelphia Fed President Patrick Harker, who said the U.S. central bank should begin discussing the time frame for paring back its bond-buying program. Friday’s U.S. jobs report may offer clues on the economic rebound from the pandemic and inflation risks.
With global equities hovering at record levels after a powerful rally from pandemic lows, investors are grappling with a range of cross-currents. These include the risk that inflation could prove sticky, and the potential for speculative fervor to reemerge in so-called meme stocks such as AMC Entertainment Holdings Inc. The possibility that central banks may start to withdraw emergency support is also top of mind as the economic recovery gains traction.
The various comments from officials help “the Fed to communicate early and communicate often so that the public gets so comfortable with the idea of tapering,” Kristina Hooper, Invesco chief global market strategist, said on Bloomberg Television.
While prominent investors such as BlackRock Inc. Chief Executive Officer Larry Fink say the potential for an inflation spike may be underestimated, Fed officials have mainly stuck to the message that price pressures are likely transient and stimulus will remain in place to nurture the reopening from the health crisis.
Still, the U.S. central bank said it plans to begin gradually selling a portfolio of corporate debt purchased through an emergency lending facility launched last year, as the Covid-19 pandemic was spreading panic through financial markets.
Key to watch this week will be the May U.S. employment report on Friday.
These are some of the main moves in markets:
Stocks
S&P 500 futures rose 0.1% as of 7 a.m. in London. The index rose 0.1%
Nasdaq 100 contracts added 0.1%. The index climbed 0.2%
Japan’s Topix Index increased 0.8%
Australia’s S&P/ASX 200 Index was up 0.6%
South Korea’s Kospi index rose 0.8%
Hong Kong’s Hang Seng Index shed 0.6%
China’s Shanghai Composite gauge rose 0.3%
Euro Stoxx 50 futures rose 0.1%
Bonds
The yield on 10-year Treasuries held at 1.59%
Australia’s 10-year bond yield fell two basis points to 1.66%
