Oil price surge boosts ASX, US stocks
The Australian share market has opened strongly after a surge in oil prices which also boosted US stocks following a rollercoaster day on Wall Street.
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An overnight oil price surge has fuelled a strong open for the Australian sharemarket with some big energy stocks climbing close to 20 per cent.
The S&P/ASX200 benchmark index was up 72.2 points, or 1.4 per cent, at 5,226.5 at 1015 AEDT on Friday, riding high on hopes a truce is imminent in the oil price war between Saudi Arabia and Russia.
The All Ordinaries index was also up, rising 76.1 points, or 1.47 per cent, to 5,264.8 after the first 15 minutes of trading.
The energy sector rose by a collective 8.74 per cent, with Santos up 12.85 per cent, Origin climbing 5.68 per cent, Woodside Petroleum rising 9.35 per cent, Beach Energy up 10.42 per cent and Oil Search up 19.16 per cent. The heavyweight miners also drove the bourse higher with a solid early performance.
Wall Street’s major indices all closed higher after coronavirus-driven rise in US unemployment claims was offset by an oil price surge.
US President Donald Trump tweeted he had held a constructive call with Saudi Crown Prince Mohammed bin Salman, and expected OPEC+ with Russia to agree to cut oil output by as much as 10 million to 15 million barrels.
The opening rise for local stocks continues a week of wild swings. The S&P/ASX200 benchmark index finished Thursday down 104.3 points, or 1.98 per cent, at 5,154.3, while the All Ordinaries index dropped 102 points, or 1.93 per cent, to 5,188.7.
The Australian dollar is buying 60.63 US cents, down from 61.84 US cents as the market closed on Thursday.
WALL STREET RISES DESPITE US JOB LOSSES
Wall Street pushed higher on Thursday (local time) after a surge in oil prices helped resuscitate beaten-down energy stocks.
The gains helped overshadow another report showing the coronavirus outbreak is forcing millions of Americans into the unemployment queue by the week.
The S&P 500 was up a little less than one per cent in afternoon trading after flipping between small gains and losses shortly after the opening bell. It took off with the price of oil, which surged more than 30 per cent after US President Donald Trump said he expects Saudi Arabia and Russia to back away from their price war. But like oil, stocks gave up a good chunk of their initial jumps as markets weighed how definitive Mr Trump’s comments were. He tweeted only that he expects and hopes for upcoming production cuts after talking with Saudi Crown Prince Mohammed bin Salman.
Oil producers have been continuing to pull oil from the ground to maintain their market share, even as demand for energy cratered because of widespread stay-at- home orders and other economy-damaging restrictions caused by the coronavirus outbreak. The resulting build-up of oil supplies sent crude’s price spiralling by roughly two thirds in the first three months of the year.
Benchmark US crude oil was up 22 per cent at US$24.71 per barrel, as of 1.30pm (4.30am AEDT). It’s rallying back after dropping below US$20 earlier this week to its lowest price since 2002. At the year’s start, it was above US$60. That helped energy stocks in the S&P 500 rally 6.3 per cent, by far the biggest gain among the 11 sectors that make up the index. Schlumberger jumped 9 per cent, EOG Resources rose 7.9 per cent and Occidental Petroleum leapt nearly 18 per cent, but all three remain down by more than half for the year.
The Dow Jones Industrial Average rose 134 points, or 0.6 per cent, to 21,077, and the Nasdaq was up 0.4 per cent.
JOB LOSSES AFFECT EARLY MARKETS
Earlier, news that 10 million Americans have filed for unemployment in two weeks has dampened investor hopes that stronger global markets could lead to a rebound on Wall Street after futures for the S&P 500 hinted at a positive opening.
The US Labor Department announced this morning US time that more than 6.6 million people filed new claims for unemployment benefits last week, following 3.3 million claims the week before.
Investors had been expecting a new weekly figure closer to 5 million.
Meanwhile, markets in London and Frankfurt rose almost 1 per cent while Shanghai gained 1.7 per cent, Seoul added 2.3 per cent and Hong Kong also rose after spending the day swinging between gains and losses. Tokyo sank 1.4 per cent and Sydney also declined.
On Wall Street, futures for the benchmark S & P 500 Index and Dow Jones Industrial Average were both up 1.9 per cent.
The S & P 500 was down by nearly 4.5 per cent at Wednesday’s close following a March quarter which ranked as the worst wreckage on Wall Street since 1938.
The market fell after US President Donald Trump and his coronavirus team warned that up to 240,000 Americans could be killed by the virus and that the nation faced a “very, very painful two weeks”.
Commentators around the globe are now predicting many nations could be facing unprecedented economic conditions for at least the next six months. The total number of cases globally is nearly one million – with more than 200,000 in the US alone.
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“The number of unemployed is set to surge and first half growth will be heavily affected,” said Mizuho Bank in a report.
“Fear, fear and more fear descended upon the market,” said Jingyi Pan of IG in a report.
Traders say markets will be turbulent until numbers of new cases decline, but Pan said that “still looks to be a distance away.”
The worst-performed stocks this week included banks, utilities and other dividend payers.
Department store icon Macy’s has lost 74 per cent in 2020. So much of its stock value has vanished that it was removed from S & P 500 index of big US companies as US investors were rattled by mounting evidence of the virus’s impact on major companies and the economy.
Washington has approved a $A3.6 trillion relief package and Congress is now considering another round of assistance.
Originally published as Oil price surge boosts ASX, US stocks
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