Oil gains after US, UK strike on Houthis; U.S. yields falls after PPI

UNITED STATES: Oil prices rose on Friday as some oil tankers diverted course from the Red Sea after overnight strikes by the U.S. and Britain on Houthi targets in Yemen, while U.S. Treasury yields eased on news that U.S. producer prices unexpectedly fell in December.

Wall Street stocks eased as U.S. earnings season unofficially began. Major U.S. banks reported lower profit on Friday in a quarter hit by special charges and job cuts. Even as its quarterly profit fell, JPMorgan Chase reported its

best-ever annual profit and forecast higher-than-expected interest income for 2024. Its shares were down 0.2%, and an S&P 500 bank index was down 1%.

U.S. and British warplanes, ships and submarines launched dozens of air strikes across Yemen overnight in retaliation against Iran-backed Houthi forces for attacks on Red Sea shipping. The move widened a conflict stemming from Israel's war in Gaza. Brent crude futures rose 88 cents, or 1.1%, to settle at $78.29 a barrel. The session high was more than $80, its highest this year so far. U.S. West Texas Intermediate crude futures climbed 66 cents, or 0.9%, to settle at $72.68, paring gains after touching a 2024 high of $75.25.

The U.S. PPI data underscored views that the Federal Reserve may cut interest rates as soon as March. The producer price index for final demand dipped 0.1% last month as the cost of goods declined, while prices for services were unchanged, which bodes well for lower inflation in the months ahead. Data on Thursday showed U.S. consumer prices rose more than expected in December.

"Markets are shrugging off yesterday's CPI report since the underlying inflation trend is improving and the Fed can legitimately consider cutting rates this year," Jeffrey Roach, chief economist for LPL Financial in Charlotte, North Carolina, wrote. "The inflation pipeline is clearing and consumer prices will gradually get to the Fed's 2% target."

The benchmark 10-year Treasury yield edged lower on the day to 3.952%. The Dow Jones Industrial Average fell 150.51 points, or 0.4%, to 37,560.51, the S&P 500 lost 1.92 points, or 0.04%, to 4,778.32 and the Nasdaq Composite dropped 18.43 points, or 0.12%, to 14,951.76.

The pan-European STOXX 600 index rose 0.84% and MSCI's gauge of stocks across the globe gained 0.22%. European Central Bank (ECB) President Christine Lagarde said rates could be cut if the central bank was sure that inflation had fallen to its 2% target.

The U.S. dollar index was slightly higher in afternoon trade, while the New Zealand and Australian currencies were among the day's best performers. The dollar index rose 0.186%.

Bitcoin last stood at $43,642, down 5.4%. It surged to a two-year high of $49,051 on Thursday after the U.S. Securities and Exchange Commission late Wednesday approved exchange traded funds linked to bitcoin. In Asia, Japan's Nikkei extended its impressive gains so far this year, jumping 1.5% to another 34-year high.

Chinese inflation data showed the country's economic recovery remained weak in December, with the consumer price index falling 0.3% from a year ago. However, separate trade data showed exports rose faster than expected last month while imports returned to growth. In Taiwan, hundreds of thousands of people attended final pre-election rallies in Taiwan ahead of Saturday's critical presidential and parliamentary polls.