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GLOBAL MARKETS-Oil price above $80 lifts stocks, rate hikes expected

Published 2018-09-25, 11:56 a/m
© Reuters.  GLOBAL MARKETS-Oil price above $80 lifts stocks, rate hikes expected
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* Bond yields rising on expectation of more policy tightening

* Oil at 4-year highs on supply concerns

* Dollar slumps as investors anticipate Fed hike

* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh

By Hilary Russ

NEW YORK, Sept 25 (Reuters) - World shares climbed on Tuesday as oil prices above $80 a barrel lifted U.S. energy stocks and as some central banks were expected to raise interest rates, spurring investors to look beyond the latest round of U.S.-China tariffs.

On Wall Street, energy shares rose along with banks, which climbed in anticipation of a U.S. Federal Reserve rate hike later on Tuesday. But U.S. shares then lost some steam, weighed by losses in Facebook (NASDAQ:FB) and chipmakers. Dow Jones Industrial Average .DJI rose 13.91 points, or 0.05 percent, to 26,575.96, the S&P 500 .SPX gained 0.54 points, or 0.02 percent, to 2,919.91 and the Nasdaq Composite .IXIC added 6.31 points, or 0.08 percent, to 7,999.55.

MSCI's gauge of stocks across the globe .MIWD00000PUS gained 0.11 percent, while the pan-European FTSEurofirst 300 index .FTEU3 rose 0.51 percent.

Concerns over trade tensions between the U.S. and China, the world's two biggest economies, were offset by oil, which grabbed the spotlight and added to gains after surging more than 3 percent on Monday. O/R

OIL JUMPS

Brent crude futures LCOc1 shot to four-year highs of almost $82 a barrel, catapulted by imminent U.S. sanctions on Iranian crude exports and the apparent reluctance of OPEC and Russia to raise output to offset the potential hit to global supply. combination of tight supply, healthy demand, falling global inventories – down from already under-stored levels – and anemic spare capacity helps support an oil price which could end the year above $90," Richard Robinson, manager of Ashburton's Global Energy Fund, said.

U.S. crude CLcv1 rose 0.21 percent to $72.23 per barrel and Brent LCOcv1 was last at $82.09, up 1.1 percent on the day.

The rise in energy shares, however, failed to squash broader market pessimism after new tariffs imposed by Beijing and Washington on each other's goods kicked in on Monday, and Chinese Vice Commerce Minister Wang Shouwen accused the United States of putting "a knife to China's neck." are other big worries for investors too, not least the timing and pace of central bank policy tightening.

While the Fed is poised to hike rates for a third time in 2018 this week, European Central Bank President Mario Draghi on Monday raised expectations the euro zone will also start to normalize policy over the coming year by referring to "relatively vigorous" underlying inflation and brisk wage growth. pushed German 10-year bond yields to four-month highs DE10YT=RR above 0.5 percent.

U.S. 10-year Treasury yields touched a new four-month high US10YT=RR above 3.10 percent in advance of government debt supply later Tuesday and on bets about Fed interest rate hikes. 10-year notes US10YT=RR last fell 6/32 in price to yield 3.0983 percent, from 3.078 percent late on Monday.

The U.S. dollar weakened ahead of the Fed's two-day policy meeting, as investors have already priced in two more interest rate increases this year and some in 2019, leaving little room for further currency gains. dollar index .DXY , tracking it against a basket of major currencies, fell 0.06 percent, with the euro EUR= up 0.16 percent to $1.1765.

Since mid-August, the dollar has declined 3.1 percent against that basket of currencies.

"The U.S. dollar appears vulnerable... given extended speculative bullish positioning against most of the G10 currencies and considerable tightening already reflected in fed funds futures," said Eric Theoret, currency strategist at Scotiabank in Toronto.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Oil prices have risen sharply since 2017 png

https://tmsnrt.rs/2xF310l German Bund yield at 4-month highs

https://reut.rs/2N1Vcqe

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