Stock mar­kets rally as oil rises by 5pc a bar­rel

The Pak Banker - - MARKETS/SPORTS -

Euro­pean mar­kets closed higher and Wall Street ral­lied as oil jumped al­most 5% on hopes for a deal to tackle the global crude glut. The FTSE 100 in Lon­don ended 0.6% higher at 5,911 points, while Frank­furt and Paris both added about 1%.

Europe had fol­lowed Asia lower ear­lier af­ter Shang­hai tum­bled 6.4% to its low­est close since De­cem­ber 2014. Brent crude jumped al­most 6% to $32.30 a bar­rel, re­vers­ing ear­lier falls, while US oil was up 5.4% at $31.98.

The Dow Jones in­dus­trial av­er­age surged 1.8%, while the S&P 500 closed 1.4% higher. Oil made gains on hopes that both Opec and non-Opec pro­duc­ers would take ac­tion to tackle over­sup­ply, af­ter Opec on Mon­day called for co-op­er­a­tion from oil pro­duc­ing na­tions out­side the car­tel.

Share mar­kets have had a rocky start to the year as wor­ries over slow­ing eco­nomic growth in China have in­ten­si­fied, while com­mod­ity prices have also been buf­feted.

Al­though China's econ­omy is still ex­pand­ing, the pace of growth is slow­ing, re­duc­ing de­mand for prod­ucts such as coal and iron ore and thus their prices.

Oil prices were hit again ear­lier on Tues­day by fig­ures from China show­ing an­nual rail freight vol­ume - a key eco­nomic in­di­ca­tor - fell 11.9% last year, com­pared with a de­cline of 3.9% in 2014.

Daniel Ang, an an­a­lyst with Phillip Fu­tures in Sin­ga­pore, said de­mand re­mained weak: "It is go­ing to be very dif­fi­cult to main­tain higher prices."

"Wher­ever you look - China, oil and the US, there is no clear ev­i­dence of im­prove­ment in eco­nomic fun­da­men­tals," said Tat­sushi Maeno, man­ag­ing di­rec­tor at PineBridge In­vest­ments. Com­ment­ing on the Shang­hai slide, Kaiyuan Se­cu­ri­ties an­a­lyst Yang Hai said: "We've seen an­other stam­pede driven by panic."

Rabobank's Michael Ev­ery said: "It's just an­other in a long se­ries of slumps that we have seen in this mar­ket, and it's not the last we will see ei­ther be­cause the mar­ket is still over­priced. And too many peo­ple want to get their money out - it's been a bub­ble since it be­gan last sum­mer."

He ex­pected Shang­hai, China's top main­land stock mar­ket, to fall a fur­ther 10% be­fore stabilising. The in­dex has al­ready fallen about 17% this year. On the FTSE 100, the top ris­ers were all min­ers, in­clud­ing An­glo Amer­i­can, Glen­core and Rand­gold Re­sources. Gold ral­lied to its high­est level since Novem­ber, up 1% at $1,114.70 an ounce. The safe-haven com­mod­ity has risen nearly 5% this year, af­ter slid­ing more than 10% in 2015. The US Fed­eral Re­serve's rate­set­ting com­mit­tee starts a two-day pol­icy meet­ing on Tues­day and is not ex­pected to make any change.

Mean­while, Chi­nese state me­dia have warned bil­lion­aire in­vestor Ge­orge Soros against bet­ting on falls in the yuan or the Hong Kong dol­lar. Soros, who made more than $1bn from short­ing ster­ling in 1992, has said he was bet­ting against the S&P 500, com­mod­ity-pro­duc­ing coun­tries and Asian cur­ren­cies, al­though he has not specif­i­cally men­tioned the yuan or Hong Kong dol­lar.

China's cen­tral bank has been mak­ing plenty of liq­uid­ity avail­able to the bank­ing sys­tem to avoid any cash squeeze ahead of the long Lu­nar New Year hol­i­day early next month. Traders said that the bank would in­ject 440bn yuan (£46bn) into the money mar­kets, the big­gest daily injection in three years.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.