Oil prices could be casting a shadow on markets (ISFM) (08-04-2011)

Investor relief as the strong aftershock in Japan did not make the situation in the battered country worse outdid concerns of the ongoing oil rally on the last day of this week. Indeed there was no fresh damage at the Fukushima Dai-ichi nuclear power complex, where workers have been making some progress in the ruined power plant by stopping highly radioactive water from flowing into the Pacific Ocean.

Markets in the region rose led by Japan, with TEPCO gaining on relief that a powerful earthquake overnight hadn’t inflicted much damage and on a higher outlook from the likes of Fast Retailing Co., among others. Conversely, Indian stocks extended their fall on concern high commodity prices could hurt corporate earnings and prompt further interest rate increases.

Oil markets were under a lot of pressure, particularly as fighting intensified in Libya, where is produced a little under 2 percent of the world's daily oil output. Benchmark crude for May delivery rose by $1.30 at $111.60 a barrel, the highest since September 2008, in electronic trading on the New York Mercantile Exchange. Highlighting the need for a safe haven, gold futures rose yet again, reaching $1,468 while silver topped $40 an ounce and among currencies the euro jumped and the dollar sank.

In Europe, markets advanced in the wake of the rally in Japanese stocks overnight and a surge in precious-metal prices. The relief in Asia after the tsunami warning was lifted carried over to the European markets this morning; they were gaining as the interest-rate hike from the ECB and the Portuguese news were well priced in and there did not seem to be anything strongly affecting sentiment.

Back on Wall Street, U.S. stocks opened with rising modestly after the previous day's losses, but the gains might encounter the stumbling block of oil prices rising to levels not seen since September 2008.

Source: ISFM