NEW YORK: Oil and stocks rebounded on Thursday after President Barack Obama and Senate Republicans agreed on the need to raise the level of the US debt ceiling.
The White House and Congress intensified negotiations for a deficit-reduction deal as major US corporations clamored for lower tax rates they said would increase their global competitiveness.
Oil prices had seesawed earlier in the session as traders tested whether a deep sell-off in commodities beginning last week could be nearing an end.
A weaker US dollar helped crude oil snap back from earlier losses that were triggered after the International Energy Agency cut its global demand forecast and China tightened another notch its bank reserve requirements..
In London, Brent crude for June delivery was up $1.04 at $113.62 a barrel, while US June crude rose $1.67 cents at $99.88.
Concern about slower economic growth in China and Europe had pressured commodity prices earlier in the session, prompting investors to sell stocks and other risky assets.
‘The dollar came under pressure and the stock market looked like it started to pare losses and we seem to have digested the China reserve requirement hike,’ said Gene McGillian, analyst, Tradition Energy in Stamford, Connecticut.
The euro bounced off a six-week low against the dollar after a policy maker at the European Central Bank said April's interest rate rise was ‘certainly not’ a one-off.
ECB policy-maker Luc Coene told Reuters that inflation risks in the euro zone have increased and price pressures are building.
The ECB raised interest rates by 25 basis points to 1.25 percent in April to address the firming price pressures, ending two years of crisis-induced loose policy. Financial markets expect two more such rises this year.
US stocks erased early losses in a volatile session as fluctuating commodity prices kept the market churning while the agreement by lawmakers on the need to raise the debt ceiling showed progress on an important issue for markets.
Commodities rebounded after US data showed a decline in jobless benefit claims last week and a revision to retail sales data suggested consumer spending in the first quarter might have been stronger than initially thought.
‘What longer term investors have to be wary of here is that is very hot money. If it does come back in it is not likely to stay for long and the fundamentals of supply and demand do matter,’ said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.
The Dow Jones industrial average was up 58.58 points, or 0.46 percent, at 12,688.61. The Standard & Poor's 500 Index was up 5.95 points, or 0.44 percent, at 1,348.03. The Nasdaq Composite Index was up 14.95 points, or 0.53 percent, at 2,860.01.
US Treasuries prices widened losses after the Treasury's 30-year bond auction drew a tepid bid.
Since the results, Treasuries have traded lower. In cash trade, 30-year Treasury bonds were down 1 point with yields rising to 4.36 percent.
The dollar index was down 0.30 percent at 75.10, while the euro was up 0.49 percent at $1.4265. Against the Japanese yen, the dollar was down 0.22 percent at 80.88.
Spot gold prices rose $7.26 to $1,507.00.
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