Oil surges as strong earnings drive US stocks higher

·4 min read
OPEC's plans to only slowly reopen the oil taps are helping boost crude prices

Oil prices surged Wednesday on increased optimism for a post-pandemic economic rebound, while US stocks rose after strong earnings at big-name banks and most European markets closed higher.

Adding more than four percent, crude was responding to news of drawdowns from US reserves and higher demand forecasts from the International Energy Agency as the global growth outlook brightens.

"With other risk assets also rising, there is no doubt that optimism over the re-opening of global economies has also helped to fuel the rally after a lengthy consolidation in recent weeks," said Fawad Razaqzada of Thinkmarkets.

While both the IEA and oil producing countries' club OPEC have lifted demand expectations, the cartel and its allies plan to wind back pandemic production cuts only slowly.

"Demand looks set to recover at a quicker pace than supply growth. Against this backdrop, investors are happy to keep buying the dips in crude oil," Razaqzada said.

In US stocks, the Dow Jones Industrial Average added 0.6 percent in morning trading, after top banks JPMorgan Chase and Goldman Sachs both outperformed forecasts in first-quarter profits, the first of the earnings season.

"Robust capital markets activity, improved credit quality and a hot housing market were instrumental in driving the blowout results," noted Patrick J. O'Hare of Briefing.com.

On the tech-heavy Nasdaq, cryptocurrency exchange Coinbase was set to make its debut, with a reference price of $250 per share valuing it at $65.3 billion -- making it the biggest entrant since Uber in 2019.

Bitcoin hit an all-time high of $64,870 ahead of the much-anticipated launch, marking continued frenzy around the virtual currency despite concerns about a bubble.

Across the Atlantic, London and Paris were up while Frankfurt fell as Europe enters its own earnings season, with UK supermarket giant Tesco announcing a surge in profits.

The pound, euro and yen all gained against the dollar after a string of strong US inflation readings.

And US Federal Reserve chairman Jay Powell was expected to speak in his first appearance since Tuesday's consumer inflation figure.

- EU bets on Pfizer -

There have been fears in recent months that the expected strong global recovery will send prices racing higher and force central banks to taper the ultra-loose monetary policies that have helped spur a year-long equity rally.

US 10-year Treasury bond yields, which have risen to around one-year highs on expectations of higher interest rates in future, eased back after the inflation data.

O'Hare predicted that Powell "will acknowledge (the higher readings) and then summarily declare that high inflation prints in the near term are expected to be transitory" -- meaning the Fed can keep its foot on the accelerator for now.

US traders initially sold off shares in J&J in response to news that US authorities had recommended pausing its Covid-19 shot owing to blood clot fears, which was then followed by the firm saying it would delay the European rollout.

The move comes as AstraZeneca's jab has raised similar concerns, and deals a blow to the global immunisation rollout. However, analysts pointed out that other vaccines were seeing no problems.

Pfizer also said it had enough production capacity to produce more than two billion doses this year, while the EU Commission said it would receive an additional 50 million doses of the Pfizer/BioNTech shot in the second quarter to help make up for the J&J shortfall.

"This will substantially help consolidate the rollout of our vaccination campaigns," Commission chief Ursula von der Leyen said.

- Key figures around 1615 GMT -

New York - Dow: UP 0.6 percent at 33,890.38 points

London - FTSE 100: UP 0.7 percent at 6,939.58 (close)

Paris - CAC 40: UP 0.4 percent at 6,208.58 (close)

Frankfurt - DAX 30: DOWN 0.2 percent at 15,209.15

EURO STOXX 50: UP 0.2 percent at 3,976.28

Tokyo - Nikkei 225: DOWN 0.4 percent at 29,620.99 (close)

Hong Kong - Hang Seng Index: UP 1.4 percent at 28,900.83 (close)

Shanghai - Composite: UP 0.6 percent at 3,416.72 (close)

Euro/dollar: UP at $1.1980 from $1.1947 at 2050 GMT

Pound/dollar: UP at $1.3789 from $1.3751

Euro/pound: DOWN at 86.88 pence from 86.89 pence

Dollar/yen: DOWN at 108.94 yen from 109.06 yen

Brent North Sea crude: UP 4.4 percent at $66.46 per barrel

West Texas Intermediate: UP 4.7 percent at $63.02 per barrel

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