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Stimulus hopes pump oil, stocks higher
[NEW YORK] World stock markets and oil prices rallied on Friday, building on the previous day's recovery sparked by European Central Bank hints of more eurozone stimulus.
Tokyo's Nikkei 225 index got the markets off to a positive start, surging nearly six per cent following a report in the Nikkei business daily that the Bank of Japan was considering extra economy-boosting measures in response to worries about deflation.
The Japanese report allowed European and US markets to extend Thursday's upward climb following comments by ECB chief Mario Draghi suggesting more stimulus was likely in March.
Equity markets in Frankfurt, London, Paris and New York all rose two percent or more.
Oil prices also jumped for a second day in a row, gaining nine per cent in the US to finish at US$32.19 a barrel in New York.
"This stabilization in equities has been highly correlated to the price of oil," said David Levy of Republic Wealth Advisors. Oil prices "have moved up about nine per cent and brought equities along with them."
Analysts said both oil and stocks were oversold in the short run and primed for a bounce. Global stocks have been in steady retreat for almost all of January, cutting trillions of dollars in value amid worries of slowing Chinese growth, tanking oil prices and the potential for a global recession.
Yet analysts warned that it is too soon to declare an all-clear after a bruising open to 2016 trade. For one thing, oil prices have still not stabilised.
"Until we clearly break the bear market trends, there's still a lot of uncertainty, still a lot of doubt," said Chris Low, chief economist at FTN Financial.
"The stock market is oversold on a short-term basis and probably due for a snapback rally of some kind," said Briefing.com analyst Patrick O'Hare. "However, until there is a reversal in the earnings estimate and economic growth trends, the propensity to sell into strength is apt to persist." "We're not predicting a recession, but honestly, if one were to occur, could anyone say they'd be completely surprised?"
With oil prices rallying, energy companies saw their share prices rocket on Friday. Royal Dutch Shell jumped 5.4 per cent, BP won 3.1 per cent and ExxonMobil rose 3.3 per cent.
However shares in Italian oil exploration and engineering firm Saipem plunged 20 per cent in Milan after the company announced a 3.5 billion euro capital hike would be at a 37 per cent discount.
Technology stocks were strong. Apple jumped 5.3 per cent, Amazon 3.7 per cent and Microsoft 3.6 per cent.
But Dow member American Express plunged 12.1 per cent after announcing plans to cut US$1 billion in spending in response to a dim profit outlook for the next two years. The credit card company said it faces tougher competition for its traditional base of affluent customers.
Russia's battered ruble bounced back after the jump in crude oil prices, recovering ground a day after it slumped to an all-time low against the dollar. The nation's energy-reliant economy has been pushed into recession by tumbling oil prices and Western sanctions over Ukraine.