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US stocks on the front foot as gasoline surges

Thursday 14.30 BST

What you need to know

  • Gasoline futures leap above $2 a gallon as Harvey dents supply
  • S&P 500 opens up, dollar continues to rebound
  • Report of ECB concerns knocks euro

Overview

US stocks are opening higher and the dollar is regaining its poise, while gasoline futures jumped above $2 per gallon as the outlook for supply dimmed in the wake of tropical storm Harvey.

Hot topic

US gasoline futures surged above $2 per gallon for the first time since July 2015, as damage from tropical storm Harvey curtailed supplies from oil refineries.

Nymex September gasoline futures are trading at $2.0216 per gallon — up 7.3 per cent from Wednesday’s settlement and more than 20 per cent from a week before.

The market was spooked by the prospect of shortages as more than 3m barrels per day of refining capacity was knocked offline by flooding and wind damage following Harvey’s landfall last week.

The S&P 500 is opening up 0.2 per cent at 2,463, putting it on course for its fifth straight day of gains.

Shares on European bourses are also continuing to rise on Thursday, with the benchmark Euro Stoxx 600 adding 0.9 per cent and the FTSE 100 gaining 0.8 per cent.

Equities

Carrefour is the biggest faller on the Euro Stoxx 600 after reporting poor results, with the French supermarket’s share price down 13 per cent and on track for its largest one-day share price drop since the financial crisis.

Hong Kong’s Hang Seng closed down 0.4 per cent as big Chinese banks fell despite outperforming expectations for quarterly earnings. Industrial & Commercial Bank of China, the largest lender in the world by assets, was down as much as 2.8 per cent.

A stronger dollar against the yen delivered a boost to Japanese financials, which rose as much as 1 per cent in Tokyo. Fujifilm rose as much as 3.9 per cent after announcing a share buyback and raising its profit target. The Topix index closed up 0.6 per cent.

In Sydney the S&P/ASX 200 index closed up 0.8 per cent as the materials segment gained 1.1 per cent, while energy stocks dipped 1.6 per cent following a drop in crude oil prices overnight.

Forex and fixed income

The greenback is continuing to rebound, with the dollar index — which tracks the buck against a basket of peers — up 0.3 per cent after rising 0.7 per cent on Wednesday.

The dollar is now teetering between posting a gain and loss for the month of August, the difference between halting a five-month slide, or notching its longest losing streak in 14 years.

“The price action suggests that the sharp US dollar sell-off was likely an overshoot in the near-term, due to the close proximity of technical support, heightened concerns over the fallout from Hurricane Harvey and rising geopolitical tensions,” said MUFG currencies analyst Lee Hardman.

The euro is also in retreat from Thursday’s earlier highs above $1.19, after Reuters reported that a rising number European Central Bank officials are concerned about the single currency’s sharp climb this year. The euro is down 0.3 per cent versus the dollar at $1.1845.

The flight to quality seen earlier in the week is largely reversing, as a measured response from US President Donald Trump to North Korea’s missile launch eased nerves.

The yen is off 0.2 per cent at ¥110.42 to the dollar, while the yield on the 10-year US Treasury was up 1 basis point at 2.14 per cent

Government bonds in the European periphery are rallying, with yields on Italian, Spanish and Portuguese 10-year bonds all 2 to 3 basis points lower, after the Reuters report also suggested that the surging euro could slow the ECB’s tapering of bond purchases.

The yield 10-year German Bund is also now flat on the day at 0.36 per cent. Data released on Thursday showed that eurozone inflation rose faster than expected in August, while the area’s unemployment rate held steady at its lowest level since 2009.

UK Gilts are little changed, despite the Bank of England’s Michael Saunders setting out the case for raising interest rates. The 10-year Gilt yield is flat at 1.03 per cent.

Commodities

Crude oil halted its decline on Thursday after a drop during the previous session, with the international benchmark Brent up more than 1 per cent at $51.40 a gallon. West Texas Intermediate, the US marker, is up 0.8 per cent at $46.34.

The price of gold is now up on the day, reversing earlier declines on Thursday, trading up 0.16 per cent to $1,310.57 per ounce.

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