US futures slip while oil prices flatline despite Joe Biden releasing strategic reserves
US futuresfell slightly on Wednesday as marketscontinued to digest a move higher in bond yields.
- Oil flatlined after rising the day before, despite the White House announcing it would release 50 million barrels from strategic reserves.
US futures slipped on Wednesday ahead of a series of data releases, while oil prices flatlined after rising on Tuesday despite President Joe Biden announcing the release of 50 million barrels from strategic reserves.
The increases on Tuesday came despite the White House announcing the US will release oil from its strategic reserves over the coming months, in coordination with China, India, Japan, South Korea and the UK.
The Biden administration aims to cool gas prices, which have risen sharply on the back of a strong rally in crude oil.
US and Brent oil prices have risen around 70% over the last year as the OPEC group of oil-producing countries has held down supply, while demand has rebounded strongly as the coronavirus crisis has abated in advanced economies.
"Biden's decision to release 50 million barrels from December was sharply below expectations and certainly does not go far enough to address the imbalance between demand and supply," said Victoria Scholar, head of investment at trading platform Interactive Investor.
She added that Brent crude, the global benchmark, "is potentially on track to test the October highs once again around $85 a barrel."
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Stocks have had a relatively rocky week as investors have reacted to Monday and Tuesday's sharp rise in bond yields, which was driven by bets that the Federal Reserve will become more aggressive on inflation after Jerome Powell was nominated for a second term as chair.
Tech stocks have fared badly as investors have become more concerned about inflation and increased their bets that the Fed will raise interest rates next year. Technology company stocks tend to do better when borrowing costs are low.
Traders have a raft of data coming their way on Wednesday, with Federal Reserve minutes; figures on initial jobless claims, new home sales and consumer sentiment; and a second reading of second-quarter GDP all due.
Bond yields, which move inversely to prices, cooled slightly on Wednesday. The yield on the key 10-year US Treasury note was down 2 basis points to 1.645%, having touched a one-month high of 1.68% on Tuesday.
The dollar index rose 0.21% to 96.69, its highest since May, as investors anticipated tighter monetary policy from the Fed. Higher interest rates tend to make dollar-denominated assets more attractive.
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