Expectations of further stimulus from the Federal Reserve and China’s central bank pushed oil prices and other riskier assets higher this afternoon.
Early in the session, HSBC said its China PMI index dropped to 47.8 this month, hitting the lowest level since November. The data added to speculation that the Chinese government could soon take stimulus action to stimulate economic growth to ensure that its GDP growth target of 7.5 percent is met.
Meanwhile, yesterday’s minutes from the latest policy meeting of the Federal Reserve showed that US policymakers thought that further stimulus was warranted “fairly soon” unless there was a significant improvement in the US economy.
However, the FOMC members did not specify what kind of stimulus they were ready to implement to shore up the recovery.
It has been speculated that the Fed could launch a third round of quantitative easing – known as QE3 – at the next meeting, which will take place in mid-September.
However, president of the Federal Reserve Bank of St. Louis James Bullard said today that the minutes were stale and that “we have some data since then that has been somewhat stronger”.
Next week, the Fed will hold a symposium in Jackson Hole. Comments from chairman Ben Bernjanke will be scrutinised for clues on the possibility of QE3.
The Department of Energy yesterday reported that America’s crude stocks shed 5.7 million barrels last week, while a Dow Jones Newswire survey predicted a drawdown of only 400,000 barrels.
US light, sweet crude for October delivery, currently the most actively traded contract on the New York Mercantile Exchange (NYMEX), rose 33 cents to US$97.59/barrel this afternoon.
October Brent crude jumped 78 cents to US$115.69/barrel on the ICE Exchange.
Today’s top risers in the oil and gas sector were:
Borders & Southern Petroleum (LON:BOR), up 33 percent at 27.34 pence at midday
Mediterranean Oil & Gas (LON:MOG), up 23 percent at 14.19 pence
Urals Energy (LON:UEN), up 8 percent at 5 pence
Ascent Resources (LON:AST), up 7 percent at 1.85 pence
Falkland Oil & Gas (LON:FOGL), up 6.5 percent at 93.55 pence
Exillon Energy (LON:EXI), up 5.5 percent at 125.25 pence
The top fallers were:
Sound Oil (LON:SOU), down 14 percent at 0.495 pence at midday
Nostra Terra Oil & Gas (LON:NTOG), down 4 percent at 0.47 pence
Max Petroleum (LON:MXP), down 3.5 percent at 4.05 pence
Aurelian Oil & Gas (LON:AUL), down 3.5 percent at 8.95 pence