Global Markets: Oil rises as Asia shares up, Fed caution drags on dollar

Brent oil rises back above $80 as Iran sanctions loom
United Bank for Africa

Asian shares were higher on Monday amid conflicting signals on the chance of a truce in the Sino-U.S. trade dispute, while oil rose four times.

In commodity markets, gold found support from the drop in the dollar and held firm at 1,1222.67 dollars.

Oil prices found some aid from expectations the Organisation of Petroleum Exporting Countries would cut output.

Brent crude was up at 68.11 dollars a barrel, while U.S. crude gained 58 cents to 57.84 dollars.

MSCI’s broadest index of Asia-Pacific shares outside Japan tacked on 0.1 per cent and South Korea 0.5 per cent.

Japan’s Nikkei gained 0.4 per cent, but E-Mini futures for the S&P 500 slipped 0.3 per cent.

Wall Street had firmed on Friday after U.S. President Donald Trump said that he may not impose more tariffs on Chinese goods after Beijing sent a list of measures it was willing to take to resolve trade tensions.

The comment stoked speculation of a deal when Trump meets Chinese President Xi Jinping on the sidelines of a G20 summit in Argentina later this month.

However, Sino-U.S. tensions were clearly on display at an APEC meeting in Papua New Guinea over the weekend, where leaders failed to agree on a communique for the first time ever.

U.S. Vice-President Mike Pence said in a blunt speech that there would be no end to U.S. tariffs on 250 billion dollars of Chinese goods until China changed its ways.

Also uncertain was the outlook for U.S. interest rates.

Federal Reserve policymakers are still signalling rate increases ahead but also sounded more concerned about a potential global slowdown, leading markets to suspect the tightening cycle may not have much further to run.

Some factors playing out will focus attention on an appearance by New York Fed President John Williams later on Monday to see if he echoes the same theme.

Investors have already lengthened the odds on further hikes, with a December move now priced at 75 per cent, down from over 90 per cent.

Futures imply rates around 2.75 per cent for the end of next year, compared to 2.93 per cent early this month.

Yields on U.S. 10-year paper have duly declined to 3.06 per cent, from a recent top of 3.25 per cent.

The dollar followed to reach 96.438 against a basket of currencies, down from a peak of 97.693.

The euro was up at 1.1414 dollars, while the dollar backed off to 112.77 yen.

Sterling remained vulnerable at 1.2833 dollars after political turmoil over Brexit caused steep losses last week.

British Prime Minister Theresa May said on Sunday toppling her would risk delaying Brexit as she faces the possibility of a leadership challenge from within her own party.

With both pro-EU and pro-Brexit lawmakers unhappy with the draft agreement, it is not clear she will be able to win the backing of parliament, raising the risk Britain leaves the EU without a deal.