Energy shares fall on oil decline; U.S. yields post monthly surge

Wed Aug 31, 2016 5:02pm EDT
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By Sam Forgione

NEW YORK (Reuters) - U.S. and European shares fell on Wednesday as a drop in oil prices weighed on energy stocks, while two-year U.S. Treasury yields ended August with the biggest monthly increase since November on growing expectations the Federal Reserve will raise interest rates.

Oil prices tumbled to more than two-week lows, with U.S. crude falling more than 3.5 percent, after government data showed a large weekly build in U.S. crude and distillate stockpiles and a smaller-than-expected draw in gasoline.

The weakness in oil prices drove declines in the S&P energy index .SPNY and the European STOXX 600 Oil and Gas sector , both of which closed down 1.4 percent.

Investors focused, however, on U.S. non-farm payrolls data due on Friday, which could provide clues on the timing of the next Fed rate increase. [nL1N1BC230] [nL1N1BB1S1]

Data showing the U.S. private sector added 177,000 jobs in August, compared with expectations of 175,000, boosted investors' optimism about Friday's numbers.

"People are too focused on transitory events and that's what is causing these ups and downs in oil prices," said John Conlon, chief equity strategist at People's United Wealth Management.

Yields on U.S. two-year Treasuries US2YT=RR, which are more sensitive than longer-dated maturities to expectations about the timing of Fed rate increases, rose 14 basis points for August. [nL1N1BC10M]

Benchmark 10-year Treasury US10YT=RR yields posted their biggest monthly increase in more than a year, of 12 basis points.   Continued...

Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York, U.S., August 30, 2016. REUTERS/Lucas Jackson