Europe sees soft open after positive Asia session

Thursday 08:00 BST

What you need to know
● European bourses soft despite positive Asia session and as US futures steady
● Energy shares under pressure as oil struggles to recover from sell-off
● Dollar soft as sterling and euro shrug off election concerns
● Sovereign bond yields hold near recent lows
● Gold prices add 0.1 per cent to $1,281 an ounce
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Hot topic

Oil prices are steadier as they try to rebound from a sharp sell-off that has been weighing on shares in energy companies.

Brent crude dropped 3.6 per cent on Wednesday, taking its losses for the first three days of the week to more than five per cent, as traders were rattled by news of a jump in US inventories.

The unexpected spike in stockpiles is again raising concerns that US producers are counteracting the Opec-agreed output cuts designed to support crude prices.

Brent, the international oil benchmark, is recovering 0.8 per cent to $53.33 a barrel, having traded with a range of roughly $50-$57 a barrel for the year to date. West Texas Intermediate, the main US contract, is up 0.8 per cent to $50.86 a barrel.

Equities

The European oil and gas sector lost 1.2 per cent on Wednesday and it is down another 0.6 per cent at the start of the new session. This leaves the pan-European Stoxx 600 index down 0.2 per cent.

London’s FTSE 100, which on Wednesday turned negative for the year as foreign currency earners got walloped by a resurgent pound, is dipping another 0.1 per cent as the currency strengthens again.

US index futures suggest the S&P 500 will add 1 point to 2,339 when trading gets under way later in New York. The Wall Street barometer on Wednesday closed 2.4 per cent shy of its record high touched in March as investors remained unimpressed by the ongoing first-quarter corporate earnings season.

Earlier in Asia, the mood was slightly more upbeat as traders shrugged off the latest dip in the US. In Sydney, a drop for the energy segment could not stop the S&P/ASX 200 adding 0.3 per cent, while stronger financials helped the Topix in Tokyo inch up 0.1 per cent.

Hong Kong’s Hang Seng index rose 0.5 per cent but on the Chinese mainland the Shanghai Composite dipped 0.1 per cent to hover near a 10-week low as investors shed racier bets and moved into defensive holdings such as healthcare.

Forex

The UK pound — which earlier this week jumped 2.7 per cent to a five-month high above $1.29 against the greenback after the country’s prime minister called a surprise general election — is up 0.4 per cent on Thursday to $1.2831.

The euro is adding 0.3 per cent to $1.0740 as traders remain wary about the French presidential election, the first round of which takes place this weekend.

The New Zealand dollar is climbing 0.5 per cent to $0.7040 following the release of data showing that consumer inflation reached the central bank’s target rate for the first time since 2011.

The dollar index is hovering just above three-week lows, easing 0.2 per cent to 99.57, as traders continue to trim bets on a faster pace of monetary tightening by the Federal Reserve following some lacklustre US economic data of late.

Fixed income

This reasoning is being reflected in the sovereign bond markets. The 10-year US Treasury yield, which moves opposite to the bond price, is little changed at 2.20 per cent, just a few basis points above its lowest level since November.

The probability of a Fed rate rise at its June meeting is placed at 46.6 per cent, down from almost 70 per cent a few weeks ago.

German 10-year Bund yields are dipping 1bp to 0.20 per cent as haven buying ahead of the French election counteracts news that producer prices have hit a five-year high.

Yield on the 10-year Japanese government bond rose 1bp to 0.001 per cent after dipping below zero on Wednesday for the first time since November.

Additional reporting by Hudson Lockett in Hong Kong

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