Stocks Rise, Oil Falls as U.S. Mulls Crude Release: Markets Wrap

Stocks rose as oil dropped on reports that the Biden administration is considering a massive release of crude from U.S. reserves to combat inflation.

Travel shares led gains in Europe’s Stoxx 600, while energy shares fell. U.S. index futures climbed and Treasuries held gains, while the dollar was little changed and the yen rose from its recent slide.

Reports that Washington is preparing a plan to release roughly a million barrels of oil a day helped reverse a rebound in crude ahead of an OPEC+ supply meeting later Thursday, where the cartel is expected to stick with its strategy of a modest output boost in May.

Officials from Ukraine and Russia are set to resume talks via video conference on Friday, according to a Ukrainian negotiator, though there was no immediate confirmation from Moscow.

Global stocks are still on track for their worst quarter in two years amid concerns about a growth slowdown, with the war in Ukraine driving volatility in commodity markets. Investors are also unnerved by the prospect of a sharper withdrawal of stimulus, as the fastest inflation in a generation forces central banks to become more aggressive with interest-rate hikes. Markets now see a strong chance the Federal Reserve will lift rates by a half point at its May meeting.

“Aside from quarter-end considerations, oil is very much the center of attention in early trading this morning,” Simon Ballard, chief economist at First Abu Dhabi Bank, wrote in a note to investors. Still, “all the usual suspects are still in play, keeping the market in check, including the specter of the Fed pursuing an aggressive path of monetary policy normalization over the coming months.”

Friday’s video discussions between Ukraine and Russia would follow in-person talks this week in Turkey that didn’t produce a short-term cease-fire or major progress toward a broader peace deal. Ukraine’s negotiator said the hope was to have enough agreed on paper in another week to be able to move toward a meeting between President Vladimir Putin and President Volodymyr Zelenskiy.

A release of U.S. reserves would help ease investor concerns about soaring prices. French inflation accelerated more than expected to reach another record, following unexpectedly high readings on Wednesday from Germany and Spain.

Separately, Germany said Russia has backed off its demand that natural gas purchases be made in rubles, in an apparent de-escalation. Russia will lift the short-selling ban on local equities on Thursday, removing one of the measures that helped limit the declines in the stock market after a record long shutdown.

Meanwhile, Chinese data and regulatory concerns weighed on Asia stocks. Chinese authorities are considering a plan to raise several hundred billion yuan for a new fund to backstop troubled financial firms, according to people familiar with the matter.

In the U.S., Kansas City Fed President Esther George, who has been among the more hawkish Fed officials during her tenure, said she favors a “steady, deliberate” series of rate hikes. Fed Richmond Bank President Thomas Barkin said he’s open to raising rates by a half point at the next meeting.

“I don’t think it’s quite the bear market, but I would say, what is the upside of equities from here — I don’t think it’s that much,” Seema Shah, chief strategist at Principal Global Investors, said on Bloomberg TV. “The downside risks are so great. Not only is, of course, the geopolitical crisis going on, but then you have the Fed hikes.”