Euro hits six-month dollar high, as oil continues to soar

Markets react after Russia, Saudi Arabia said they could an output cut into next year

Oil prices gained further Tuesday, boosting energy companies' shares, after Russia and Saudi Arabia indicated they could extend an output cut into next year, while the euro struck a six-month dollar high.

The world's top two crude-producing nations raised the idea at the weekend, with a deal agreed between OPEC -- of which Saudi Arabia is the key player -- and Russia coming to an end in six weeks.

The news sent oil prices soaring about two percent on Monday, and a further 0.5 percent on Tuesday, helping energy groups strengthen global stock markets.

Share price gains for Royal Dutch Shell and BP on Tuesday helped push London's benchmark FTSE 100 to a new record high of 7,505.46 points.

"Another day, another record high for the FTSE 100," said Kathleen Brooks from City Index.

Volatility was at "extremely low levels and the oil price (continued) to benefit from the OPEC-effect," she said.

Vodafone was the top performer, gaining 4.2 percent, despite registering a 6.1-billion-euros ($6.9-billion) annual loss, as traders focused on the increased dividend and optimistic outlook for next year.

But eurozone equity markets -- less exposed to commodity-driven stocks -- fell back, with Frankfurt down 0.1 percent and Paris down 0.3 percent, despite confirmation that the single currency area's economic growth in the first quarter was a solid 0.5 percent.

Gains in the oil markets come after the commodity was battered earlier this month on worries that the production cut was not enough to make a dent in a worldwide supply glut.

On Tuesday the International Energy Agency said supply and demand in the oil market are close to matching up but warned rising US supply could mitigate the OPEC-led production cuts.

- Euro hits heights -

In Asia, Tokyo's main shares index edged up 0.3 percent by the close, Hong Kong slipped 0.1 percent on profit-taking following a six-day rally, while Shanghai finished up 0.7 percent, marking a fourth straight day of gains.

On currency markets the euro extended gains to break above $1.10 -- reaching a six-month high -- as the dollar wobbled following a series of below-par results out of the US, including on inflation.

"The euro is strengthening as political concerns in Europe ease, while the dollar is being sold" after the weak economic data, Marito Ueda, a senior dealer at FX Prime, told AFP.

The European single currency hit $1.1059 on Tuesday -- the highest point since November 9.

Elsewhere Tuesday, official figures showed that British inflation had risen to 2.7 percent -- its highest level since September 2013 -- but failed to boost the pound as investors bet against an immediate rise in interest rates to curb prices.

"With little sign of overheating in the domestic economy, and only one (Bank of England) Monetary Policy Committee member voting for higher rates at last week's policy meeting, it seems rates will be stuck at 0.25 percent for some time," said Ben Brettell from Hargreaves Lansdown.

Related:
Join the Discussion

Disclaimer:The view expressed here by our readers are not necessarily shared by Arabian Business, its employees, sponsors or its advertisers.

NOTE: Comments posted on arabianbusiness.com may be printed in the magazine Arabian Business

Please post responsibly. Commenter Rules

  • No comments yet, be the first!

All comments are subject to approval before appearing

Further reading

Features & Analysis
Danger zone: what would the wider impact of a slowdown in China have on the Gulf?

Danger zone: what would the wider impact of a slowdown in China have on the Gulf?

Last week’s stock market crash in China sent shockwaves through...

2
Blood on the bourse floor

Blood on the bourse floor

Arabtec’s share price collapse was the catalyst for a huge sell...

Taking stock

Taking stock

Gulf stock markets have seen a dearth of IPOs since the global...

Most Discussed
  • 9
    Revealed: huge disparity in Dubai school fees

    I recall a recent study by Alpen Capital suggesting that the average cost of a child's entire life of schooling in Dubai is about AED 1 million. Although... more

    Monday, 29 May 2017 9:21 AM - New Expat
  • 3
    How Saudi Arabia blundered into OPEC oil cut

    Well written piece. Clearly the pressure on OPEC countries holding to their quotas will become even harder. Nigeria etc. are desperate to pump & sell a... more

    Monday, 29 May 2017 9:18 AM - Victory Red
sponsoredTracking