Wall Street bounced on Thursday as hopes of a truce between Saudi Arabia and Russia to cut oil output drove a record 22% surge in prices, more than offsetting the shock of over 6 million Americans filing for jobless claims due to COVID-19 driven business lockdowns.
President Donald Trump said Saudi Arabia and Russia had agreed to curb oil production in order to stabilise prices, even after data showed US weekly jobless claims soared to a record.
He claimed in a tweet and then an interview with CNBC that he had spoken to the Saudi leader and Russia’s President Putin but a Putin spokesman told the Russian Interfax newsagency that no call had happened.
Oil prices jumped, as did gold, the COVID-19 death toll and infection rates in the US rose above 5,000 and 100,000 respectively.
But the markets ignored that and the record number of new jobless and the S&P 50 rose 2.28% to 2,527, the Dow jumped 469 points, or 2.24% as well, to 21,413, and Nasdaq was up 1.72% to 7,487.
European markets ended higher with modest gains (the Italian market was up 1.75% to head the gainers) and the STOXX 600 index gave a more accurate readout with a rise of just 0.42%.
All that saw the optimists in the ASX futures market push the overnight gains to 114 for the ASX 200 at 7.30 am from 41 point gain just before 5 am.
That size gain will offset Thursday’s 104.3 points, or 2% slide in the ASX 200, to 5154.3.
The Aussie dollar started the session around 61.20 and by 7.30 am Friday had slid to 60.60 US cents and looks headed lower during today.
As in the US where the likes of Exxon Mobil and Chevron saw big gains, the prices of local energy stocks like Woodside, Oil Search, Beach and Santos will enjoy gains, as will gold stocks after the big rise in the metal’s price overnight.
Iron ore prices were up around 1.5% which should help the likes of BHP, Rio and Fortescue Metals
Saudi Arabia called for an emergency OPEC meeting, but that will be useless because Russia is not a member and rejected increased cuts for a production cap that was to be renewed from April 1.
Russia’s rejection sparked the Saudi price and volume war which Russia has said it will fight.
American production is running at a record 13 million barrels a day (more than Russia or the Saudis) and without a big cut from Trump’s country, it is doubtful Russia will agree to anything.
A cut in US output may come in the next year as more and more small to medium oil companies collapse and go out of business.
Oil prices leapt 30% on the tweet but ended the session with gains of just under 23% as doubts about Trump’s claims started emerging.
The big, solid, lasting news was the 6.65 million rise in new jobless claims, double last week’s 3.3 million claims and up from just 281,000 a week before that.
It means in the past two weeks an extra 10 million Americans are now on jobless benefits.
Tonight’s March jobless and new jobs figures, therefore, will be irrelevant as the 10 million extra jobless came after the labour force data was gathered.
That’s a development that saw Bank of America Merrill Lynch (BAML) economists harden their forecast for the US economy to the deepest recession in history from predictions 10 days ago of a modest slide.
The BAML economists forecast a 30% (annual) slump in US GDP in the current June quarter.
Fitch Ratings also changed its global forecast to a contract of 1.9% for the year from a small rise of 1.3% in their previous forecast late in March.