Oil down by 2%, but well on-course for weekly gain

Kenny Grant
January 14, 2019

Japan's Nikkei 225 index, which closed up 1.1 percent on Wednesday, retreated 1.3 percent to 20,157.72. Britain's FTSE 100 rose 0.6 percent to 6,982.74. Australia's S&P ASX 200 lost 0.4 percent to 5,774.60. Shares fell in Taiwan but rose in Singapore, Indonesia and the Philippines.

US crude prices finished the week up 7.6 percent, their best showing in six months. But industrial companies rallied after US negotiators said China had agreed to buy more energy and agricultural products and manufactured goods.

For the week, the Dow rose 2.4 percent, the S&P 500 added 2.54 percent and the Nasdaq gained 3.45 percent.

Heightened risk appetite boosted US Treasury yields to the highest this year, while the US dollar extended losses after minutes from a December 18-19 Federal Reserve policy meeting showed many Fed policymakers said the central bank could be patient on future rate hikes. He echoed the tone of other Fed officials who were present at a meeting last month.

International Brent crude futures had yet to trade. A market-sensitive Fed is reassuring to investors who fear its tightening policies would send the US economy into recession.

The meetings in China were the first face-to-face talks since Trump and Chinese President Xi Jinping met in Buenos Aires in December and agreed a 90-day truce in a trade war that has disrupted the flow of hundreds of billions of dollars of goods.

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The pan-European STOXX 600 .STOXX benchmark was up 0.09 percent, bringing its weekly gain to 1.7 percent.MSCI's all-country index .MIWD00000PUS , was flat at 473.26.

So far this year, investors have breathed a sigh of relief as hopes of a trade deal between the U.S. and China have risen and comments from officials at the U.S. Federal Reserve have suggested that the pace of interest rate increases could ease this year. "The return of risk appetite, in turn, has pressured the US dollar lower", DBS Group Research strategists Philip Wee and Eugene Leow said in a commentary.

CHINESE INFLATION: On Thursday, China released consumer and producer inflation figures that missed the mark.

U.S. Treasury yields last stood at 2.696 percent, down from 2.710 percent at the U.S. close on Wednesday. Slowing inflation raises doubts about the health of the world's second largest economy. The sharp gains extended a rally that has pushed futures up about 14 percent this year.

At the start of trading on Wednesday, crude oil prices were up around 1 percent through OPEC curbing oil production and with the ongoing trade talks between the US and China generating investor optimism.

Brent net-long positions - the difference between bullish and bearish wagers - climbed 3.8 percent to 158,146 options and futures contracts in the week ending January 8, the ICE Futures Europe exchange said on Friday. It added another 23 cents to $52.59 per barrel on Thursday.

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