While you were sleeping: Oil deflates on US stockpiles

Thursday 8th October 2015

Equities in the US and Europe rose, while oil gave up its earlier gains following a US government report showing a larger than expected gain in crude inventories, as investors geared up for the earnings season.

Oil retreated after a US Energy Information Administration report showed domestic crude inventories increased by 3.1 million barrels last week. West Texas Intermediate was recently down 40 cents at US$48.13 a barrel, after rising as high as US$49.71 earlier in the session.

"Today’s report was a complete disaster for those who bet on higher prices as it shows inventories and production are up," Rob Haworth, a senior investment strategist in Seattle at US Bank Wealth Management, told Bloomberg. "It’s hard to argue for US$50 oil with these fundamentals."

Wall Street moved higher. In New York trading at about 2.05pm, the Dow Jones industrial average gained 0.62 percent, the Standard & Poor’s 500 Index rose 0.65 percent, and the Nasdaq Composite Index increased 0.72 percent.

Gains in shares of Johnson & Johnson and those of Merck, each last up 1.8 percent, led the Dow higher.

With expectations firming the US Federal Reserve may refrain from a planned interest rate increase this year, San Francisco Fed Bank President John Williams reminded investors a hike was still on the table.

"We’re balancing a number of considerations, some of which argue for a little more patience in raising rates and others that argue for acting sooner rather than later," Williams said in a speech.

"And given the progress we’ve made and continue to make on our goals, I view the next appropriate step as gradually raising interest rates, most likely starting sometime later this year," Williams noted. "All in all, things are looking up, and if they stay on track, I see this as the year we start the process of monetary policy normalisation.”

The chance of a December hike has dropped to 36 percent, from 60 percent at the end of August, according to futures data compiled by Bloomberg.

"It's clear that once the Fed begins raising interest rates, the process will be slower than we've ever seen," Ellis Phifer, market strategist at Raymond James in Memphis, Tennessee, told Reuters.

In Europe, the Stoxx 600 Index ended the session with a 0.1 percent increase from the previous close. France’s CAC 40 Index also eked out a 0.1 percent gain, while the UK’s FTSE 100 Index rose 0.2 percent, and Germany’s DAX Index advanced 0.7 percent.

Here, a report showed industrial production in Germany unexpectedly dropped in August.

SABMiller rejected an improved takeover proposal from Anheuser-Busch InBev, saying the 68 billion-pound (US$104 billion) offer wasn’t high enough.

“It still very substantially undervalues SABMiller, its unique and unmatched footprint, and its standalone prospects,” the company said in a statement.

BusinessDesk.co.nz

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