Oil prices drop; stocks gain as Treasury yields ease

© Reuters. People walk past a screen displaying the Hang Seng stock index outside Hong Kong Exchanges, in Hong Kong, China July 19, 2022. REUTERS/Lam Yik/File Photo

By Caroline Valetkevitch

NEW YORK (Reuters) - Oil prices fell sharply on Wednesday amid demand worries, while Wall Street stocks edged higher after recent losses.

Brent crude futures touched their lowest since early February. Earlier, data showed China's export growth slowed in August.

Benchmark U.S. Treasury yields slipped after earlier hitting three-month highs, with the 10-year note yield last at 3.29%, while all three major U.S. stock indexes rose in early trading.

Concerns that inflation will remain persistently high and keep driving interest rates higher had lifted yields in recent weeks.

The European Central Bank is widely expected to raise interest rates sharply when it meets this week, while the U.S. central bank is expected to raise rates by another 75 basis points at its Sept. 20 to 21 meeting.

Fed Chair Jerome Powell is expected to speak on Thursday.

"We've seen a global repricing and it's generally been supported by an acceleration of expected tightening due to inflation concerns," said Jonathan Cohn, head of rates trading strategy at Credit Suisse in New York.

U.S. crude recently fell 3.51% to $83.83 per barrel and Brent was at $89.89, down 3.17% on the day.

The Dow Jones Industrial Average rose 179.79 points, or 0.58%, to 31,325.09, the S&P 500 gained 23.12 points, or 0.59%, to 3,931.31 and the Nasdaq Composite added 63.63 points, or 0.55%, to 11,608.54.

The pan-European STOXX 600 index lost 0.60% and MSCI's gauge of stocks across the globe gained 0.07%.

The U.S. dollar index was weaker. The dollar currency earlier touched a fresh 24-year peak against the Japanese yen.

The dollar index fell 0.118%. The Japanese yen weakened 1.17% versus the greenback at 144.50 per dollar.

The euro was up 0.42% to $0.9944.

The European Union proposed a price cap on Russian gas on Wednesday hours after President Vladimir Putin threatened to halt all supplies if they took such a step, raising the risk of rationing in some of the world's richest countries this winter.

Liz Truss, who took over as Britain's prime minister on Tuesday, vowed immediate action to help the economy, which faces double-digit inflation and an expected lengthy recession.

Sterling was last trading at $1.1466, down 0.43% on the day.