World stocks win a respite, oil prices highest in over a month

LONDON (May 15) - World stocks edged higher on Friday and oil prices rallied more than 2%, as sentiment revived after a week pressured by deteriorating U.S.-China relations.

Oil prices rose to their highest levels in more than a month on signs that demand from China is picking up and data showed China’s industrial output in April expanded for the first time this year.

European shares were broadly higher, with stock markets in London, Paris and Frankfurt tracking overnight gains in U.S. and Asian markets.

U.S. stock market futures however were mixed, highlighting a degree of caution among investors.

After a bruising week, a broad measure of European stocks was set to end the week 3% lower - the biggest weekly fall since the mid-March rout in global stocks.

MSCI’s world stock index, a touch firmer on Friday, is down around 2.5% this week.

Analysts said this week’s drop, while a natural correction after a rally since mid-March, also reflected growing concerns about rising U.S.-China tensions.

The Trump administration on Friday moved to block shipments of semiconductors to Huawei Technologies from global chipmakers, an action that could ramp up tensions with China.

U.S. President Donald Trump on Thursday signalled a further deterioration in his relationship with China over the novel coronavirus, saying he has no interest in speaking to President Xi Jinping and suggesting he could even cut ties with Beijing.

“There is no doubt that the optics around the trade/diplomacy backdrop have worsened in the last week and this has had a negative influence,” Chris Bailey, European strategist at Raymond James in London, said.

“There has also been a subtle change in the perceptions of market participants, for example the negative interest rate debate getting a very good airing in the United States.”

U.S. Federal Reserve Chair Jerome Powell has brushed off the notion that the Fed could push rates below 0% after futures tied to Fed interest rate policy expectations began pricing a small chance of sub-zero U.S. rates within the next year.

Two-year U.S. Treasury yields are trading at just 0.15%, while short-dated bond yields in Britain have dipped back below 0% this week.

Reuters