Oil Advances on Tightened Markets, while USD Declines

US futures and European and Asian stocks started the new month on a high note. Most of them moved up on Tuesday. Oil and other commodities jumped, buoyed by investors’ optimism that the global economy is recovering from the pandemic at a quick pace. The US dollar declined.

The Stoxx Europe 600 Index added 0.5%, brought up by cyclical shares which advanced after it became known that the European Union would lift all quarantine restrictions in July.  Bolstered by the successful progression of the vaccination process in the United Kingdom, the British pound climbed to a three-year peak, trading at 1.4240 per dollar. 

After the release of the report showing that manufacturing grew in Asia in May, despite the outbreak of coronavirus, MSCI Inc.’s gauge of Asia-Pacific equities soared to the highest level in over a month. Futures on the S&P 500 and the Nasdaq edged higher, after the celebration of Memorial Day in the USA. Treasuries were up on Tuesday. 

When OPEC and its allies predicted that a market would tighten, oil prices increased. Commodities, including iron ore and copper, surged higher as well. Their rising prices made investors think of faster inflation and reduction in stimulus, thus stirring up worries that have been haunting investors for a while already. 

Overall, global markets are beginning a new month near record highs, supported by the revival of the economy and liquidity. But investors are concerned that climbing prices could instigate central banks to withdraw their support earlier than everyone would wish. Meanwhile, market participants are waiting for the release of crucial US job data later this week, which will help them to measure the rebound of the American economy. 

Traders should follow the following movements in the markets on Tuesday:

Stocks

The Stoxx Europe 600 gained 0.5% during the early hours of the European trading session. The FTSE jumped 1.09%. The DAX in Germany soared 1.18%. The French CAC moved 0.66% higher. The MSCI Asia Pacific Index advanced 0.4%. The MSCI Emerging Markets Index added 0.6%. The Topix rose 0.17%. The Hang Seng in Hong Kong added 1.08%. The Nikkei in Japan shed 0.16%. 

Currencies

The euro traded virtually unchanged at $1.2234. The Japanese yen was little changed at 109.51 per dollar. The offshore Chinese yuan also traded unchanged at $6.3758 per dollar. The British pound soared to a three-year high at $1.4240. 

Commodities

Brent crude gained 1.3% to trade at $70 per barrel. WTI surged 1.86% to $68.18 per barrel. Gold spot rose 0.3% to $1,913 an ounce. Copper traded at $467.15. 

Bonds 

The yield on 10-year Treasuries appreciated three basis points to 1.62%. Germany’s 10-year yield rose two basis points to -0.17%. Britain’s 10-year yield added three basis points to 0.82%. 

Looking forward

• OPEC+ meets to review oil production levels on Tuesday.
• Philadelphia Fed President Patrick Harker, Chicago Fed President Charles Evans, Atlanta Fed President Raphael Bostic and Dallas Fed President Robert Kaplan speak on Wednesday.
• U.S. employment report for May is unveiled on Friday. 

Have a productive trading day!