Oil prices surged as ministers from OPEC and its allies considered lifting output. AFP
Oil prices rallied on June 1 on demand optimism before the latest Opec output meeting, while equity markets mostly rose despite resurfacing concerns over high inflation that could tighten global interest rates, hampering economic recovery.
Inflation in the eurozone jumped to the highest level since October 2018 as Covid restrictions across Europe were scaled back, boosting the economy and stoking energy prices, official data showed.
Consumer prices in the 19 countries that use the euro rose by 2.0 per cent year-on-year, beyond the target of the European Central Bank (ECB), the EU’s Eurostat agency said.
“Most of the rise is due to temporary factors, including higher energy inflation, and we expect the headline rate to drop back to well below the ECB target next year,” noted Andrew Kenningham, chief Europe economist at Capital Economics research group.
The euro traded mixed on the data, while eurozone stock markets rallied.
London stocks, resuming trade after a long holiday weekend in the UK, were also higher, with shares in heavyweight oil and mining groups in demand on rising commodity prices.
Sterling meanwhile hit $1.4248 – its highest level versus the dollar since April 2018 – on UK growth optimism.
Oil prices powered higher ahead of a monthly gathering of Opec and allies, with expectations that they will begin to lift output from next month as they grow confident the world economy is well on the recovery track and demand will improve further.
Brent North Sea crude reached $71 per barrel – the highest point since October 2018.
And analysts expect more gains for global equities in the short term but warn the road will be bumpy as inflation spikes – owing to a strong recovery in activity, supply issues, bottlenecks and a low base of one-year comparison.
The rollout of vaccines around the world has allowed leaders of key economies including the US and Europe to wind back the containment measures that sparked a recession last year.
That, combined with mind-boggling government spending splurges and central bank largesse, has been crucial to a rally in global equities from their March 2020 lows to record or multi-year highs.
