Global Overview: Equities show signs of recovery

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There was a sigh of relief in financial markets on Monday following a sharp retreat for oil prices, although some analysts cautioned that crude might still have further to rise.

European and Asian equities and the dollar spiked higher following the failure of US crude to break through the psychological $50 a barrel level. Wall Street stocks, however, put in a less sanguine performance following a sales warning from retail giant Wal-Mart.

The price of oil itself came under pressure following a modest early rebound. In late London trade, October Brent was down 27 cents at $43.27 a barrel, while Nymex crude was 67 cents lower.

But Deutsche Bank warned that the risks to oil prices remained on the up. “The [supply disruptions] in Iraq, and strong demand, leave Opec utilisation rates over 95 per cent, and make the oil market highly vulnerable to upside shocks,” said oil analyst JJ Traynor. “Any further supply-side disruptions could lead to very high prices, even from current levels.”

There were no such fears for the pan-European FTSE Eurotop 300, however, which gained 1.4 per cent to 964.65. It was the index's biggest one-day rise since mid-May.In New York at the close, the Dow Jones Industrial Average was lower at 10,073.05 after Wal-Mart cut its sales forecast for August because of poor back-to-school demand.

The technology-heavy Nasdaq Composite index was up at 1,838.70.

“Overall, equities now appear to offer reasonable value to investors following the 6.5 per cent fall in the MSCI World index since the end of June,” said Bill O'Neill, Global Strategist at JPMorgan Fleming Asset Management.

The dollar moved higher against a broad range of currencies as the drop in oil prices fuelled a more optimistic view on the prospects for world economic growth.

Treasury bond yields also moved higher as a lack of fresh economic data prompted a modest bout of selling. Volumes were light, however, as many market participants traditionally take the last two weeks of August as holiday.

Asian equity markets generally moved higher, with Tokyo gaining 0.7 per cent and Hong Kong rising 0.4 per cent.

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