Oil falls to seven-week low below $125
Oil prices fell to a seven-week low below $125 a barrel this morning as US energy demand was seen reaching a tipping point, sending investors back into Asian stocks for the fourth consecutive day.
A retreat in oil prices and signs of improved confidence in the US financial sector also pushed the US dollar to a one-month high against the yen.
Adding to a sense of short-term relief, US President George W. Bush dropped a threat to veto a housing-bailout bill that would extend a potential $25 billion lifeline to the embattled mortgage lenders Fannie Mae and Freddie Mac.
The drop in oil and the potential housing rescue together have stopped cold a popular trade in which dealers would simultaneously bet against the financial sector and put their money in the energy sector.
The unwinding of this trade has accelerated the upward momentum in equities.
However, uncertainty loomed as to whether economics were supporting the global stock market rally, particularly after data showed Japanese exports fell for the first time in five years.
Japan's Nikkei share average rose about 1 per cent to its highest level since July 2nd, led by sectors most sensitive to fuel prices, such as automakers.
Shares in the Asia-Pacific region excluding Japan edged up 0.6 per cent to the highest level in more than three weeks, having bounced 8 per cent from a 16-month low plumbed last week.
Hong Kong's Hang Seng was up a modest 0.2 per cent, powered almost entirely by gains in the financial sector. Lower fuel prices were certainly a boon to shares of Cathay Pacific, which rose 4.2 per cent.