BLBG: Oil Climbs on Iraq as S&P 500 Futures Are Little Changed
Oil climbed to an eight-month high on concern fighting in Iraq will disrupt supplies. U.S. equity-index futures remained little changed after retail sales missed estimates, platinum fell as a South African union agreed to a wage deal and New Zealand’s dollar strengthened.
West Texas Intermediate oil rose 1.8 percent to $106.30 a barrel by 8:38 a.m. in New York. The Stoxx Europe 600 Index gained 0.1 percent and Standard & Poor’s 500 Index futures slipped less than 0.1 percent. The kiwi advanced at least 0.9 percent against 31 major peers after the Reserve Bank of New Zealand raised interest rates. Platinum dropped 2.2 percent. Turkey’s lira climbed after a report that Islamist militants will release hostages from its Mosul consulate in Iraq.
An al-Qaeda offshoot extended control over northern areas of Iraq while the Energy Information Administration said yesterday U.S. crude stockpiles fell for a second week. American retail sales rose less than forecast in May while jobless claims increased last week, reports showed today after data earlier indicated a pick-up in industrial production in the euro area.
“The Iraq development is the main driver for oil prices today and increases nervousness over the security of supply from the country,” Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said by phone today. The possibility of U.S. intervention in Iraq “is another sign of how desperate the situation is and how weak the government has become,” he said.
The S&P GSCI (SPGSCI) gauge of 24 commodities jumped 1.2 percent, the first increase in three days. Crude stockpiles fell 2.6 million barrels last week, the EIA said. Brent jumped as much as 2 percent to $112.12 a barrel, the highest since March 3.
Iraq Military
Iraqi forces sought to check the rapid advance of Islamist militants as the military backed by air power attacked fighters of the Islamic State in Iraq and the Levant in Saddam Hussein’s former hometown of Tikrit, about 80 miles (130 kilometers) north of Baghdad, state-sponsored Iraqiya television reported today. In Mosul, the airforce struck ISIL positions after they seized the largest city in Iraq’s north earlier this week, Iraqiya said.
“The Middle East may not matter as much as it used to for global energy markets, but the collapse of democracy in Iraq and the risk of extremists being the dominant political force in the region is already making some commentators question how long the U.S. ‘hands-off’ policy will really be maintained,” Kit Juckes global strategist at Societe Generale SA in London, wrote in an e-mailed note today.
The yield on $2.7 billion of Iraqi bonds due January 2028 fell five basis points to 6.85 percent.
Turkey Hostages
The lira gained 0.7 percent against the dollar and the benchmark stock gauge advanced 0.9 percent. Turkish diplomats, who were taken hostage yesterday in Mosul, will be returned to Turkey, Anka news agency reported, citing a commander from ISIL, one of the militant groups.
Palladium fell 3.4 percent to $832.10 an ounce. The world’s three largest platinum companies and the biggest union at their South African mines agreed on a wage deal that the labor organization will take to its members in a bid to end a 20-week strike. South Africa is the biggest producer of platinum and second-biggest for palladium.
The Dow Jones Industrial Average dropped 0.6 percent and the S&P 500 slipped 0.4 percent yesterday. U.S. shares have retreated since the market value of equities worldwide reached a high of $64.96 trillion on June 10 and the World Bank cut its outlook for global growth the following day.
Retail Sales
Retail sales increased 0.3 percent last month followed a revised 0.5 percent gain in April that was much larger than previously estimated, Commerce Department figures showed. The median forecast of 83 economists surveyed by Bloomberg called for a 0.6 percent advance. Jobless claims climbed to 317,000 in the week ended June 7, the Labor Department said. Analysts predicted 310,000.
Bouygues SA gained 4.6 percent after Les Echos reported that Orange SA is continuing to study a cash offer for the conglomerate’s mobile-phone business, Bouygues Telecom. Iliad SA jumped 6.3 percent. The French telecommunications company had made an informal offer for Bouygues Telecom. People familiar with the matter said the talks reached a standstill because Bouygues wanted a higher price for its unit.
The MSCI Emerging Markets Index slipped 0.1 percent, heading for first back-to-back decline in two weeks.
The Hang Seng China Enterprises Index of mainland shares listed in Hong Kong slid 0.7 percent. The Shanghai Composite Index fell 0.2 percent. China releases economic data including industrial production tomorrow.
Arabtec Holding Co. rose, breaking a four-day losing streak, after the United Arab Emirates’ biggest publicly traded construction company said it hasn’t asked to leave the Dubai bourse. Dubai’s benchmark index gained 3.7 percent.
Hawkish Stance
New Zealand’s currency jumped 1.5 percent to 86.78 U.S. cents, headed for its biggest gain on a closing basis since Feb. 4. The kiwi touched 86.88, the highest level since May 15.
Reserve Bank of New Zealand Governor Graeme Wheeler raised the developed world’s highest benchmark borrowing cost to 3.25 percent from 3 percent and said there’s a need to contain inflation expectations.
“This was a much more hawkish outcome than the market had expected” from the RBNZ, said Imre Speizer, a market strategist at Westpac Banking Corp. in Auckland. Gains in New Zealand’s currency and interest-rate swaps will probably be sustained, he said.
Italy’s 10-year yield was little changed at 2.80 percent after the government sold 8.5 billion euros ($11.5 billion) of notes and bonds due between three and 30 years, matching the maximum target. Spanish 10-year bonds fell, pushing yields three basis points higher to 2.67 percent, before the sale of a new security maturing in October 2024 via banks.
Treasury 10-year note yields rose one basis point to 2.65 percent. The U.S. is scheduled to auction $13 billion of 30-year bonds today.
To contact the reporters on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net; Stephen Kirkland in London at skirkland@bloomberg.net
To contact the editors responsible for this story: Stuart Wallace at swallace6@bloomberg.net Stephen Kirkland
