US stocks have rebounded after President Donald Trump said Saudi Arabia and Russia have agreed to cut oil production, boosting prices and helping energy companies in the middle of the coronavirus slowdown.
The rise on Wall Street came despite US jobless claims surging. The number of Americans claiming unemployment benefits for the first time hit 6.6m last week, a new record.
The S&P 500 index rose 1.9 per cent, the Dow Jones climbed 1.9 per cent, and the Nasdaq gained 1.3 per cent.
US crude was up 24 per cent in afternoon trading at $25.20 per barrel following Trump’s announcement. Brent was 22 per cent higher at $30.20 per barrel. In January, Brent was trading at around $65 per barrel.
Trump tweeted: “Just spoke to my friend MBS (Crown Prince) of Saudi Arabia, who spoke with President Putin of Russia.”
“I expect & hope that they will be cutting back approximately 10 Million Barrels, and maybe substantially more which, if it happens, will be GREAT for the oil & gas industry!”
The announcement eased the sell-off that had picked up pace after US jobless claims surged for the second week in a row amid the coronavirus outbreak.
European markets rebounded from earlier losses as US stocks climbed. The UK’s FTSE 100 was up 1.1 per cent in afternoon trading. The pan-European Stoxx 600 was up 0.8 per cent and Germany’s Dax was 0.3 per cent higher.
The dollar index – which measures demand for the greenback – rose 0.4 per cent. Most of the world’s oil trade is priced in dollars.
The oil price rebound followed weeks of falls, which were triggered by Saudi Arabia launching a price war. Saudi Arabia ramped up production in early March after talks with Russia broke down at Opec.
High levels of uncertainty weigh on US stocks
John Forsythe, chief global portfolio strategist at Boston’s Brightsphere Investment Group, said there was still a lot of confusion in the markets, affecting US stocks.
Analysts had predicted 3.5m jobless claims for the week ending 28 March. The real figure was almost double that, however, and by far the highest on record.
“Today’s jobless claims report is troubling not just because it was record-breaking but also because it easily exceeded pessimistic consensus estimates,” Forsythe said.
“US businesses and investors are still struggling to discern the basic contours of the economic fallout.”
Seema Shah, chief strategist at Principal Global Investors, struck a pessimistic tone despite market optimism. She said things are going to get worse for the global economy and US stocks.
“Not only was the [US jobless claims] number worse than expected, but with lockdowns becoming stricter and being extended, we should anticipate further surges in jobless claims over the coming weeks.”
“Productive capacity is being eroded, so when self-isolation measures are eventually lifted, economic activity will take that much longer to get back on its feet.”