Oil prices advance, stocks retreat

AFP | London

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United Kingdom Oil prices rallied and stock markets fell yesterday as investors braced for further volatility after talks appeared to stall on ending the Middle East war and re-opening the Strait of Hormuz to tanker and cargo ship traffic.

Iran’s chief negotiator said Tuesday that Washington must accept Tehran’s latest peace plan or face failure, after US President Donald Trump warned a truce was on the brink of collapse.

Rising crude futures were also pushing up government bond rates, including in Britain, where political uncertainty soared as Prime Minister Keir Starmer clings to power, analysts said.

“Oil prices are rising again, and global bond markets are pricing in inflation risks,” said Kathleen Brooks, research director at XTB trading group.

“The UK yields are facing a double whammy of an energy price spike and a political crisis,” she added.

The yield on the country’s 30- year bonds reached 5.814% Tuesday, the highest level since 1998. The 10-year rate hit 5.135%, a peak last seen during the 2008 global financial crisis.

Meanwhile, the latest consumer price index (CPI) data in the United States confirmed that high energy prices are stoking inflation, with the index recording the largest annual gain in nearly three years in April.

CPI rose 3.8% year-on-year, up from March’s 3.3% figure, the US Bureau of Labor Statistics said.

“Even after stripping out volatile food and energy costs, core CPI still topped expectations at 2.8%, reinforcing the idea that inflation remains stubborn beneath the surface,” said Bret Kenwell, US investment analyst at eToro.

Patrick O’Hare at Briefing.com called the inflation reading “a signal not to expect a rate cut anytime soon”.

Wall Street stocks fell, with both the S&P 500 and the Nasdaq Composite falling from record closing highs set on Monday.

O’Hare called the move lower “an exhaustion trade” in semiconductor and mega-cap stocks that have driven stock markets to repeated record highs in recent months.

On oil markets, the international benchmark Brent North Sea crude and the main US contract, West Texas Intermediate, both rose nearly 4%.

Europe’s main stock markets ended the day in the red after losses for some major Asian indices. South Korean calls for a social tax on artificial intelligence profits largely dragged down the tech-rich Kospi index by 5%.

South Korea is riding a chip boom driving massive earnings for tech giants Samsung and SK hynix, which had sent the Kospi to record highs in recent weeks.

Traders are now looking to Beijing, where Trump lands this week to meet with President Xi Jinping, the first visit by a US president since his own in 2017.

Taiwan, tariffs, rare earths and the war in Iran are set to top the agenda, with China a major buyer of Iranian crude. Top executives including Tesla boss Elon Musk and Apple’s Tim Cook will fly in to back Trump’s push to ramp up trade with Beijing