Crude oil keeps markets vigilant (22-05-2008)

The unchecked course of crude oil prices, which had already begun early during Wall Street’s session on Wednesday, as well as the released minutes from the FOMC’s latest meeting pressured markets and stocks plunged last night, with the Dow closing more than 227 points lower, as investors concern regarding rising costs extended for a second day. 

Asian markets were mostly lower as a further advance in crude oil prices favored oil companies but hurt airlines and shipping. 

A number of analysts are at a loss to forecast how the skyrocketing price of crude oil is going to abate, given that demand is growing and production remains the same or drops because of various problems. The issue has also caused the value of the dollar to resume its weakness, while the euro gained strength after the improved business sentiment coming out of Germany. 

In Europe stocks remained under pressure throughout the day also on financial sector issues, as UBS announced the issue of new shares at 31% discount as part of a plan to repair its balance sheet, which has been hardest hit among its peers from the fallout of the U.S. subprime market.

Futures in U.S. stock markets were pointing upwards just before noon GMT after two straight declining sessions, despite the surge in crude oil prices, as the power sector may help in lifting sentiment with a possible stock only deal between NRG Energy and rival Calpine while investors await first time jobless claims and home prices.

  Source ISFM