Rising dollar, oil price fall spur a stock market rally
09 Aug 2008
Mumbai: US stocks soared fuelled by a rising dollar, which hit a six-month high against the euro, and falling oil prices that hit $115 a barrel. US stocks staged a rally on Friday with the Dow Jones Industrials soaring more than 300 points.
Crude prices dropped $5 to a three-month low of $115 on Friday as the dollar surged and concerns about global economic growth hit demand. The Russian intervention in Georgia's breakaway South Ossetia region also failed to affect market sentiment.
US sweet light crude, which was trading down $4.82 at $115.20 a barrel, hit $114.90 in late evening trade, the lowest since early May. London Brent crude was down $ 4.53 at $113.33.
Oil prices have been sliding since hitting a record high over $147 a barrel on 11 July.
US stocks staged a broad rally as 28 of the 30 Dow stocks finished with gains. Consumer companies and transport companies were the main gainers.
European markets also closed higher, buoyed by a Wall Street that discounted a of gloomy economic forecast.
In London, the FTSE 100 index added 0.21 per cent at 5489.20; in Paris the CAC 40 rose 0.77 per cent to 4491.85, while in Frankfurt the Dax ended 0.28 per cent higher at 6561.65.
The Euro Stoxx 50 index of leading eurozone shares gained 0.33 per cent to 3408.48.
A falling euro, which hit $1.5049, also helped European stocks, with the single currency slumping to $1.5049 from $1.5321 in New York late on Thursday, also aided the sentiment.
Oil prices soared to seven-year highs mainly due to a strong demand from emerging economies like China and India. The gains were also aided by investors rushing into commodities as a hedge against inflation and a weak dollar.
The market, which centered on rising dollar and falling oil prices, mostly ignored other issues like the Russian intervention in breakaway Georgian territory. Georgia hosts the Tbilisi pipeline, a key energy transport area where fighting could disrupt energy exports from the Caspian region that travel through Georgia.
Georgia's pro-West president said it was at war as Georgian troops backed by warplanes pounded separatist forces in South Ossetia and Russia sent forces to repel the assault.
Although Russia said it was in full control of the breakaway Georgian territory, fighting could disrupt energy exports from the Caspian region that travel through Georgia.
Also, on Thursday, oil supplies through the Baku-Tblisi-Ceyhan pipeline was disrupted following a blast this week in Turkey. The pipeline transports Azeri light crude to the Turkish port of Ceyhan.
BP, which operates the oil pipeline, has cut output by at least 400,000 barrels a day at the Azeri-Chirag Gunashli oilfields following the blaze.
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