Oil bounces from 18-month lows

 

Oil bounced from 18-month lows today as investors' focus shifted to a possible resolution to Europe's debt crisis rather than on weak data, while US stocks rebounded from their second-worst decline of the year.

The euro firmed against the US dollar after the European Central Bank said it would accept a wider range of collateral, including assets of lower quality, as it seeks to ease strains on the region's banking sector.

Though higher on the day, Brent crude oil was still headed for its worst weekly drop in a year, having fallen more than 8 per cent this week.

"It has been a long fall, driven by global economic slowdown and oil fundamentals such as weaker demand from China," said Tony Machacek, oil futures broker at Jefferies Bache. "Technical indicators show the market is a little bit oversold, so there could be some short-covering around."

Brent crude was last up $1.66 at $90.89 a barrel.

World stocks dipped along with European shares, however, after data showed German business sentiment fell for a second straight month in June to its lowest level in more than two years, according to the Ifo think tank. That data added to poor economic numbers this week from the United States, China and Europe.

World stocks, as measured by MSCI's global equity index , were down 0.2 per cent and European shares were down 0.5 per cent.

But investors were looking to avoid hefty sales as leaders of Germany, France, Italy and Spain were meeting in Rome today and ahead of a full EU summit next week.The US benchmark S&P 500 recovered some of yesterday's drop of more than 2 per cent, its second-worst fall of the year.

The Dow Jones industrial average was up 47.72 points, or 0.38 per cent, at 12,621.29. The Standard & Poor's 500 Index was up 4.26 points, or 0.32 per cent, at 1,329.77. The Nasdaq Composite Index was up 14.37 points, or 0.50 per cent, at 2,873.46.

US bank shares rose despite ratings agency Moody's downgrading 15 of the world's biggest banks yesterday. It lowered credit ratings by one to three notches to reflect the banks' risk of losses from volatile capital markets.

Morgan Stanley added 1 per cent to $14.10 and Bank of America Corp rose 1.2 per cent to $7.91, as many of the ratings cuts were not as deep as expected. The KBW Bank index gained 0.8 per cent.

In the foreign exchange market, the euro hit the session's peak of $1.2583 and was last at $1.2565, up 0.2 per cent.

Spanish stocks rose 2.6 per cent after independent audits yesterday showed Spain's banks will need up to €62 billion in capital, well below the €100 billion bailout ceiling.

Spanish and Italian 10-year bond yields rose but were not as high as earlier this week, when Spanish yields climbed above the 7 per cent level considered unsustainable.

Reuters