Global stocks reverse gains on hopes of recovery

Global stocks reverse gains on hopes of recovery

The global recovery will ramp up demand, but concerns about the end of long-running central bank support and rising Treasury yields saw most equity markets reverse early gains, as they believed that the global recovery will ramp up demand.

After an almost uninterrupted rally from the early days of the pandemic, world markets are showing signs of levelling out as finance chiefs shift from economy-boosting largesse to measures aimed at reining in inflation.

There is an expectation that equities will enjoy further gains this year as countries reopen and people start to feel confident about travel, especially as studies suggest the more prevalent Omicron coronaviruses variant appears to be milder and as vaccines are rolled out.

Analysts are watching the corporate earnings season that is under way, with hopes that firms can match their stellar performances last year.

While Asian markets started brightly after Monday's troubles, traders returned to selling, with US Treasury yields surged on expectations that the Federal Reserve will have to unveil several interest rate hikes to tackle a worrying spike in inflation. There were gains in Shanghai on hopes of a fresh economy-boosting measure, while Wellington and Manila edged up.

London, Paris and Frankfurt fell at the end of the day.

But oil continued to build on its early promise, with Brent climbing to $88.13 a barrel and WTI hitting $85.74, both levels not seen since October 2014.

Demand optimism was a big factor in the gains as the world reopens and concerns about Omicron ease. Jet fuel costs have gone up due to the loosening of travel restrictions in several countries.

Hopes for more monetary easing by major consumer China to reinforce its stuttering economy were also seen as a key support for the oil market.

The latest bump was a claim of an attack by Yemen's Huthi rebels in Abu Dhabi that caused a fuel tank blast killing three people Monday, prompting the group to warn civilians and foreign firms in the United Arab Emirates to avoid vital installations, which have been a focus of the news, as well as concerns about supplies from the crude-rich region.

The suspected drone attack in Abu Dhabi underscores the continued threat to civilian and energy infrastructure in the region amid heightened regional tensions, said Torbjorn Soltvedt at risk intelligence company Verisk Maplecroft.

Oil market watchers are keeping an eye on the trajectory of the ongoing nuclear talks between the US and Iran due to reports of damage to fuel trucks and storage.

The risk of a deterioration of the region's security climate is rising as negotiators run out of time. OANDA's Craig Erlam said OPEC nations and other key producers struggling to meet targets to lift output by 400,000 barrels a month was adding to upward pressure.

The evidence shows that it's not that straightforward and the group is missing the targets by a large margin after a period of underinvestment and outages, he said.

That should continue to be supportive for oil and increase the talk of triple-figure prices. Goldman Sachs has predicted the rally in oil prices to continue, with Wall Street titans saying it could break $100 next year for the first time since July 2014.

Brent crude was up 1.7 percent to $87.91 per barrel, up 1.7 percent in the North Sea.

Dollar yen was up to 114.85 yen from 114.58 yen on Monday.

Pound dollar is DOWN at $1.3646 from $1.3652