Tuesday 21:00 BST. Wall Street hovered around fresh record highs as technology stocks enjoyed a strong session and the energy sector got a boost from an abrupt rally for oil prices.
The dollar suffered further losses against the yen while sterling hit a three-week high versus the US currency as the latest UK economic data further soothed concerns about the impact of the Brexit vote.
Oil provided one of the day’s big talking points following unconfirmed reports that Iran was sending positive signals about supporting co-ordinated action to prop up the market.
Brent crude immediately rallied back above the $50 a barrel mark before settling at $49.96, up 1.6 per cent on the day. The international crude benchmark had earlier dipped to $48.48 as it extended the previous session’s 3.4 per cent slide.
US West Texas Intermediate was up 1.3 per cent at $48.02 in late trade.
Oil prices have rallied hard since the start of August on the back of speculation that major producers might agree an output freeze to help balance the market.
The latest reports suggest that Iran, which in April refused to join a production freeze plan, would attend a meeting of Opec producers in Algeria next month. It has been boosting output since the lifting of sanctions against its oil industry in January.
The hefty rally for crude provided a further layer of support for equity indices in the US and Europe as energy stocks gained ground — although markets in both regions had already pushed higher as the mining, housing and tech sectors outperformed.
In New York, the S&P 500 rose 0.2 per cent to 2,186, just shy of its recent record close of 2,190.15. The tech-heavy Nasdaq Composite hit a record 5,275.74 before easing back to 5,261, up 0.3 per cent on the day.
Across the Atlantic, the Euro Stoxx 600 index rose 0.9 per cent, with the FTSE 100 bouncing 0.6 per cent from a two-week low. In Tokyo, the Nikkei 225 fell 0.6 per cent as the yen strengthened.
The rise for the UK blue-chip index came even as sterling briefly pushed back above the $1.32 level for the first time since early August after the Confederation of British Industry’s latest industrial trends survey held up better than many had expected.
“It is still early days, but this builds on some other recent evidence that the initial impact of the referendum result, though negative, may not have been as bad as many feared,” said Andrew Kenningham at Capital Economics.
In late US trade, the pound was up 0.5 per cent at $1.3198 and was also 0.5 per cent firmer versus the euro at €1.1664.
Meanwhile, the dollar was down 0.1 per cent against the yen at ¥100.19 and the euro was 0.1 per cent softer at $1.1303 as participants continued to focus on the outlook for US monetary policy as they awaited a speech on Friday from Janet Yellen, chair of the Federal Reserve, at the Jackson Hole gathering of central bankers.
The US currency was barely changed against a weighted basket of peers.
Several Fed officials have recently suggested that a rise in official interest rates as early as September could still be on the cards, although the market is pricing in just a 26 per cent chance of that happening.
“The Fed continues to signal that it is more wary of making a policy mistake by tightening policy too quickly rather than too late,” said Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi UFJ.
“However, if the Fed did resume rate hikes in September it could provide a healthy wake-up call for the market and prompt a period of market instability, particularly after the strong search for yield which has taken place in recent months.
“The Fed should be wary that maintaining its current loose policy stance is increasing financial stability risks by encouraging excessive risk-taking.”
The yield on the policy-sensitive two-year US Treasury note was up 1 basis point at 0.75 per cent while the 10-year yield was 1bp higher at 1.55 per cent.
The 10-year German Bund yield was flat at minus 0.09 per cent after the “flash” August composite purchasing managers’ index for the eurozone signalled a steady growth expansion in the third quarter.
“The slight improvement from July emanated from the services sector, where the activity index rose to a three-month high, albeit still a touch below the average for the year so far,” said Chris Scicluna, economist at Daiwa Capital Markets.
The dollar’s lacklustre performance offered no support togold, with the metal slipping $1 in late trade to $1,337 an ounce.
For market updates and comment follow us on Twitter @FTMarkets
Get alerts on Markets when a new story is published