Oil Prices Rise Again; Stocks Open Higher

By DAVID JOLLY and JACK HEALY
The New York Times
Published: Jan 07, 2009

American stock markets opened higher on Tuesday while crude oil prices rose above $50 a barrel, their highest levels in more than a month, before falling back slightly.

Oil prices plunged from their summer peaks of $145 a barrel as the economic downturn spread, but they have rebounded from their lows as motorists took advantage of lower gasoline prices. A dispute over natural gas between Russia and Ukraine and a production cut by the OPEC cartel of 2.2 million barrels a day have highlighted concerns about tightening energy supplies.

“At least for the next couple months, it’s pretty much going to be strictly a supply and demand type of situation,” said Al Greenberg, head Chicago Board Options Exchange floor trader at BNY ConvergEx Group.

At the opening, the Dow Jones industrial average was up 77 points while the wider Standard & Poor’s 500-stock index was up nearly 1 percent as investors waited for reports on pending home sales and an economic report from America’s service sector. On Monday, the Standard & Poor’s 500 index fell 0.5 percent.

European markets were lifted by a report showing inflation dropped in the countries using the euro to a 26-month low last month, raising expectations that the European Central Bank would cut rates again next week.

Prices in the euro zone rose 1.6 percent in December from a year earlier, slowing from a 2.1 percent rise in November. The European Central Bank seeks to keep inflation just below 2 percent.

Combined with a worsening of conditions reflected in a survey of European purchasing managers, the latest data “support our view that the E.C.B. will reduce interest rates to zero this year,” Ben May, an economist at Capital Economics in London, wrote in a research note. The bank’s policy committee meets next week.

In afternoon trading, the DJ Euro Stoxx 50 index, a barometer of euro zone blue chips, rose 1.5 percent, while the FTSE 100 index in London rose 1.3 percent. The CAC 40 in Paris rose 1.3 percent, and the DAX in Frankfurt rose 1.6 percent.

The Tokyo benchmark Nikkei 225 stock average rose 0.4 percent, while the S&P/ASX 200 in Sydney rose 1.5 percent. The Hang Seng index in Hong Kong fell 0.4 percent, while the Shanghai Stock Exchange composite index rose 3 percent.

The dollar remained in the ascendant against other major currencies. The euro fell to $1.3325 from $1.3636 late Monday in New York, while the British pound fell to $1.4601 from $1.4699. The dollar rose to 94.08 yen from 93.40 yen and to 1.1258 Swiss francs from 1.1089 francs.

Credit market conditions eased slightly. The so-called Ted spread, the gap between yields on safe three-month United States government securities and the rate that banks charge each other for loans of the same duration, fell slightly to 1.29 points. The spread peaked in October above 4.6 percentage points, but has been moving lower in fits and starts since. Analysts say a level of around 0.5 point would suggest the market had returned to more normal conditions.

And government bond prices slipped, with the yield on the 10-year Treasury note, which moves in the opposite direction to its price, rise four one-hundreths of a percent.

© The New York Times. All rights reserved. This article originally appeared in The New York Times.