Commodities, equities bounce on Wall St overnight

Commodities and global equities reversed course, paced by a lower demand forecast for crude oil and optimism that policymakers in Washington have stepped towards a debt ceiling compromise.

In afternoon trading on Wall Street, the Dow Jones Industrial Average gained 0.61 per cent, the Standard & Poor's 500 Index advanced 0.58 per cent and the Nasdaq Composite Index climbed 0.65 per cent.

Oil was lifted after the International Energy Agency tweaked its demand forecast, lowering its numbers in part because of the recent surge in prices. Crude also was bolstered by a decline in the US dollar; the euro gained on renewed expectations of higher European interest rates.

"Oil climbed as the S&P 500 rebounded," Tim Evans, an energy analyst at Citi Futures Perspective in New York, told Bloomberg. "The correlation between the two is alive and well. Investors look at the S&P as a sign of where the economy is going."

President Barack Obama and Senate Republicans agreed on the need to raise the level of the US debt ceiling.

The White House and Congress intensified negotiations for a deficit-reduction deal as major US corporations pushed for lower tax rates they said would increase their global competitiveness.

Commodities rose after US data showed a decline in jobless benefit claims last week and a revision to retail sales data suggested consumer spending in the first quarter might have been stronger than initially thought.

"What longer term investors have to be wary of here is that is very hot money. If it does come back in, it is not likely to stay for long and the fundamentals of supply and demand do matter," Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York, told Reuters.

The US dollar weakened 0.2 per cent against a basket of major currencies.

Rochdale Securities banking analyst Dick Bove slapped a "sell" rating on Goldman Sachs Group and cut the price target on the stock to US$120 from US$163, citing litigation concerns.

Meanwhile, Cisco Systems said that it might not meet Wall Street's expectations this quarter.

The tech company was today's worst performer on the Nasdaq 100.

US Treasuries declined, as the government's 30-year debt auction drew the weakest demand in six months. The Treasury has now completed this week's sale of US$72 billion worth of securities.

The yield on the benchmark 30-year-bond climbed six basis points to 4.37 per cent at 1.18pm in New York, according to Bloomberg Bond Trader prices.

In Europe, the Stoxx 600 index dropped 0.7 per cent.

Commodity stocks including juggernauts BHP Billiton and Rio Tinto fell with raw materials prices. Copper traded lower most of the session before edging higher ever so slightly ahead of the close.

Higher crude prices themselves are holding back oil demand growth and threaten economic recovery in the West, the International Energy Agency said on Thursday, meaning lofty crude prices could continue to topple, Reuters reported.

The energy advisor to industrialised nations trimmed its global oil demand growth estimates to 1.29 million barrels per day, or 1.5 per cent, from 1.43 million bpd in its previous report.

"We clearly have seen demand growth slowing compared to last year's level and we're seeing it very much concentrated where the price feed through is most direct, notably in North America in terms of petrol," according to David Fyfe, head of the IEA's Oil Industry and Markets division.

Petrol prices of near US$4 a gallon in the US will lead to fewer road trips this year than last, the IEA said.