NEW YORK: Oil jumped more than 7 percent yesterday to top $51 a barrel after the US Federal Reserve announced a new plan to fight recession and a weak dollar boosted the appeal of commodities to investors.
US crude settled up $3.47 at $51.61 a barrel, the highest settlement since Nov. 28. London Brent rose $3.01 settle at $50.67 a barrel.
European and Asian shares rose in reaction to the Fed’s move on Wednesday to jump-start an ailing economy, but US stocks slipped on investors’ unease about a program that will flood the financial system with cash.
While resurgent oil prices lifted energy shares, helping to cushion the decline in US stocks, investors fretted that the Fed’s action may stir inflation in the long term.
Shares of Chevron rose 1.4 percent, the biggest boost to the sliding Dow Industrials, and ConocoPhillips jumped 3.4 percent. But Exxon Mobil slid 0.9 percent. Before 1 p.m., the Dow Jones Industrial Average was down 73.36 points, or 0.98 percent, at 7,413.22. The Standard & Poor’s 500 Index fell 6.45 points, or 0.81 percent, at 787.90. The Nasdaq Composite Index dropped 4.86 points, or 0.33 percent, at 1,486.36.
European shares closed higher, with banks and commodities taking the lead, but gains were capped as investors worried about the worldwide implications of the Fed’s program.
The pan-European FTSEurofirst 300 index of top shares rose 0.6 percent to a close of 715.17 points, well away from the session high of 730.22 points.
Gold jumped to a near three-week high and copper jumped 5 percent, cruising past $4,000 a ton in London markets for the first time in four months, as the Fed’s move to spur growth and battle a deepening recession boosted the outlook for demand.
The weaker dollar and rising European equities lifted industrial metals. A weak US currency makes metals priced in dollars less expensive for holders of other currencies.
The dollar suffered its biggest daily plunge since at least 1985 on Wednesday after the Fed announcement.
The dollar slipped against a basket of major currencies, with the US Dollar Index down 1.57 percent at 82.874. The euro rose 1.40 percent at $1.3694, and against the yen, the dollar fell 2.0 percent at 93.93.
Treasury prices were mixed. The benchmark 10-year US Treasury note rose 3/32 in price to yield 2.54 percent. The 2-year US Treasury note fell 1/32 in price to yield 0.84 percent.
Spot gold prices rose $15.85 to $955.75 an ounce.