NEW YORK Brent oil prices shot above $40 a barrel on Monday to their highest level since December after data showed a smaller-than-expected U.S. build in crude stockpiles, while technology shares weighed on U.S. equities.
Brent LCOc1 gained $2.12, or 5.5 percent, to settle at $40.84 and U.S. crude CLc1 rose $1.98, or 5.5 percent, to settle at $37.90. Traders said investors were rotating more assets into raw materials amid talk OPEC producers want a higher anchor price after a selloff that has lasted nearly two years.
In other commodities markets, spot iron ore prices jumped 19 percent, helped by expectations that Chinese steel mills were planning production cuts.
The gains in oil lifted U.S. energy shares, though the benchmark S&P 500 was down slightly in late afternoon trading as a drop in technology shares .SPLRCT more than offset energy's .SPNY 1.9-percent advance.
"Money flows from broader financial markets are powering this broader rally in oil," said Scott Shelton, energy broker with ICAP in Durham, North Carolina. "I don’t think the energy fundamentals for the next few days are going to matter much as the market is making a transition."
The Dow Jones industrial average .DJI was up 12.91 points, or 0.08 percent, to 17,019.68, the S&P 500 .SPX lost 5.95 points, or 0.3 percent, to 1,994.04 and the Nasdaq Composite .IXIC dropped 34.28 points, or 0.73 percent, to 4,682.75.
U.S. stocks have posted gains in each of the last three weeks, thanks in part to the rebound in oil prices, after a steep selloff at the start of the year.
MSCI's all-country world stock index .MIWD00000PUS edged up 0.01 percent. In Europe, the pan-regional FTSEurofirst 300 index .FTEU3 closed down 0.3 percent.
The dollar fell, wiping out its initial gains, as the oil rally kindled bids for riskier euro and commodity-sensitive currencies. The euro's gains were limited by the view the European Central Bank would embark on more stimulus to support the euro zone's fragile economic recovery at its policy meeting on Thursday.
The euro was up 0.15 percent at $1.1017 EUR=. The U.S. dollar index .DXY was down 0.2 percent.
In the U.S. bond market, U.S. Treasury yields rose in volatile trading as traders increased bets the Federal Reserve will raise interest rates this year in the wake of a strong February jobs report and ahead of a ECB meeting.
The benchmark 10-year note's yield US10YT=RR rose to 1.918 percent, its highest in just over a month. It was last down 6/32 in price to yield 1.902 percent, up from 1.883 percent late Friday.
(Additional reporting by Barani Krishnan and Richard Leong in New York, Nigel Stephenson in London, Hideyuki Sano in Tokyo, Marius Zaharia and Patrick Graham in London; Editing by Nick Zieminski and Bernadette Baum)
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