Market Update & Important Indicators
U.S. stocks edged higher Wednesday, as energy shares rose with oil prices. A fall in oil had put pressure on the market in recent days. But on Wednesday, U.S. crude oil climbed above $40 a barrel after data showed an unexpected drop in gasoline stockpiles. That helped lift shares of energy companies in the S&P 500, which rose 1% and were among the best performers in the broader index. Major U.S. indexes have pulled back from records set last month, when investors' expectations for continued stimulus from central banks helped lift stocks. Some investors have grown skeptical in recent sessions about policy makers' efforts to boost growth, after Australia and Japan disappointed investors with recent moves to stimulate their economies.
In Europe, the banking sector began to bounce back from a torrid start to the week. Market participants are looking to the Bank of England, which concludes its meeting Thursday, to cut interest rates and shore up confidence in the U.K. economy, after data this week confirmed a slowdown in the aftermath of the U.K. referendum. Meanwhile, the upgraded purchasing managers index for the Eurozone in July suggests the Eurozone's economic recovery gained some momentum in the weeks following the U.K.'s vote to exit the European Union.
Asian shares dropped as U.S. oil slid deeper into a bear market and a strong yen dragged Japanese equities lower. The Nikkei Stock Average ended Wednesday 1.9% lower, South Korea's Kospi fell 1.2% and Hong Kong's Hang Seng Index was down 1.6%. The Shanghai Composite recovered from early losses to finish 0.2%. U.S. oil prices rebounded slightly in Asian trade but the outlook remained bearish, due to anticipated production increases in Nigeria and Libya, where politically related supply disruptions were being resolved. Falling oil prices weighed on the currencies of energy-focused Malaysia, whose ringgit fell 0.7% against the U.S. dollar, according to Reuters, and Indonesia, whose rupiah dropped 0.2%. There are signs that Chinese authorities plan an interest-rate cut propped up the benchmark Shanghai Composite. Decision makers will lower benchmark interest rates and banks' reserve requirements at "an appropriate time," according to market research.
Australian shares fell for the second consecutive session after sliding oil prices set a negative tone that spread across the market, sparking heavy selling of the major banks. The S&P/ASX 200 fell below the 5500-mark for the first time in over a week to finish down 74.8 points, or 1.4%, on Wednesday at 5465.7, erasing what remained of last week's advances. The market took its lead from the U.S. where the Dow Jones Industrial Average logged its longest losing streak in nearly a year while U.S. oil prices extended losses and settled below US$40 a barrel. Surprisingly the Australian dollar jumped in the wake of yesterday's interest rate cut from the Reserve Bank of Australia adding to worries of local investors.
Copper futures closed lower on Wednesday, under pressure from a stronger dollar. The London Metal Exchange's three-month copper contract settled 0.14% lower at $4,875/t at the PM kerb close on Wednesday. Other base metals were mixed. Aluminium was up 0.9% at 1,630/t, Zinc was down 0.1% at $2,270/t, nickel was up 0.1% at $10,693/t, lead was down 1% at $1,794/t, and tin was down 0.3% at $17,932/t.
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