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The Dow Jones Industrial Average, the traditional US stock market barometer, closed at a record high on Tuesday, lifted by a dip in oil prices below $59 a barrel.
The Dow gained 0.5 per cent to close at 11,727.34. Earlier the blue-chip benchmark reached 11,758.95, surpassing its previous intra-day trading peak of 11,750 on January 14, 2000.
The US stock market was boosted by a continuation of the recent slide in oil prices, matched by declines in gold that signal waning inflation concerns for the economy.
West Texas Intermediate, the US oil benchmark, closed down $2.35 at $58.68 a barrel, its lowest level since February. Gold was down 2.1 per cent at $592.70. Commodity currencies such as the South African Rand and the Australian and Canadian dollars were weaker. The US dollar made a three-year high versus the Rand.
“Some of the speculative commodity trades are being unwound,” said Tobias Levkovich, chief US equity strategist at Citigroup. “Housing, energy and commodities are not working, the place that is working is equities and that is not unreasonable.”
Still, both the broad S&P 500 and the technology-heavy Nasdaq Composite indices remain significantly below their 2000 record highs.
The S&P 500 is 12.6 per cent below its record close of 1,527, while the Nasdaq is 55.6 per cent adrift of its closing high of 5,048 reached at the peak of the internet boom.
At the close, the S&P 500 was up 0.2 per cent at 1,334.11, while the Nasdaq Composite was up 0.3 per cent at 2,243.65.
Oil prices were hit by speculative selling ahead of the release of US inventory data on Wednesday that is expected to show increases in stockpiles of distillate fuels and petrol. Amid falling demand and reduced fears of hurricane damage, WTI prices have fallen nearly $4 since Friday and have dropped about 25 per cent from their peak of $78.40 in mid-July.
Brent crude, the UK benchmark, closed down 2.02 per cent at $58.43 barrel. It is down about 25.5 per cent from its peak of $78.65 in August.
Barclays Capital said: “We continue to see oil prices as having overshot to the downside from a fundamental perspective but acknowledge in the short-term at least, there is a risk of further downside moves.”
Merrill Lynch warned that a warm winter could send WTI below $50 a barrel. It said even the Organisation of the Petroleum Exporting Countries might not be able to prevent a price collapse as non-Opec producers were likely to bring a significant amount of new supplies on stream in coming months.
However, the bank added: “Equally a cold winter could bring about a spike in heating oil prices despite the high inventory levels.”
In Europe, the more energy-weighted stockmarkets were hit by oil price weakness. The FTSE Eurofirst 300 index fell 0.24 per cent to 1,392.
Norway’s stock market benchmark, the OBX Index, which is heavily exposed to the oil sector, lost 2.3 per cent, to 301.67.
Investors appeared to largely shrug off news that North Korea plans to conduct its first nuclear test and subsequent US comments that it would respond to such an “unacceptable threat” to world peace.
European government bonds weakened ahead of the European Central Bank’s decision on interest rates on Thursday, when interest rates could be increased to 3.25 per cent.
The 10-year Bund yield rose 4.3 basis points to 3.736 per cent and major currencies were range-bound.