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Oil barrels higher, but equities can't gain traction

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[NEW YORK] Oil prices rebounded on Thursday, coming off 10-month lows, but the increase did not give much boost to global equity markets.

Stock markets in Paris and Frankfurt rose marginally, while London dipped and Wall Street ended near flat.

"The turbulence in the energy market is weighing on investor sentiment," said market analyst David Madden at CMC Markets.

"Oil has dropped a substantial amount since March and dealers are worried it could diminish inflation and growth prospects," he added.

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Low oil prices are a boon for consumers and generally support economic growth.

However, low inflation can ultimately lead to deflation, or a prolonged period of falling prices, causing consumers to hold off on purchases in the hopes that the cost of goods will drop even further.

"While oil remains relatively low, it will chip away at investor confidence," Mr Madden said.

Oil has been in the doldrums on stubborn concerns over a vast supply glut, casting a shadow over the energy sector.

While oil prices rose Thursday on news of falling US inventories, this followed heavy declines caused by the market staying awash in crude and they remain down nearly a fifth from peaks two months ago despite Opec and Russia agreeing to extend production cuts.

Shares in American Airlines rose 1.2 per cent Thursday on news that Qatar Airways is seeking to buy about a 10-per cent stake in the US carrier. The action comes as Qatar feels the pinch from a diplomatic row with Saudi Arabia and other neighboring countries.

Health shares were broadly higher, with insurer Aetna, hospital company Tenet Healthcare and pharmacy benefit company Express Scripts all gaining. The advances came as US Republican lawmakers released a long-awaited health bill, although the proposal's prospects looked uncertain due to the apparent opposition of key senators.

In Asia, shares in Japanese airbag maker Takata suffered another crushing collapse, plummeting more than 50 per cent on fears the company at the center of the auto industry's biggest-ever safety recall is headed for bankruptcy.

The Tokyo-based car parts giant, facing lawsuits and huge recall-related costs over a bag defect linked to at least 16 deaths globally, has suffered share-price plunges for four straight days.

It is now worth less than a quarter of its value from just a week ago when a report by Japan's leading Nikkei business daily said it would seek bankruptcy protection and sell its assets to a US company.

AFP

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