FTSE 100 bounces back as Trump declares end to oil price war

The FTSE 100 looked set to end the day on a high as US President Donald Trump said Saudi Arabia and Russia had ended their oil price war.

Energy stocks jumped to propel the London index back into the green after a tumultous day for global stocks.

Staggering data showed 6.6m US jobless claims occurred in the past week, sending the FTSE 100 0.5 per cent into the red.

But Trump’s announcement on Twitter that Saudi Arabia and Russia had ended their oil price war pushed global markets higher.

FTSE 100 surges on end to oil price war

The FTSE 100 climbed 0.5 per cent up – a one per cent rise from its intra-day low – to 5,481 points.

And the Euro Stoxx 600 rose 0.7 per cent, with Germany’s Dax not far behind at 0.55 per cent.

US stocks all jumped higher. The tech-heavy Nasdaq climbed 1.3 per cent while the Dow rose 1.5 per cent. And the S&P 500 surged 1.64 per cent.

The price of Brent crude surged 19.7 per cent to $29.61. And West Texas Intermediate jumped over 23 per cent to $25.10.

“Global stocks have seen a topsy-turvy afternoon, as weakness in the wake of an incredible 6.6m initial jobless claims figure was cast aside after Trump managed to spark a 40% rally in crude,” senior IG analyst Josh Mahony said.

“Volatility has been the name of the game today, with the energy market ending up front and centre of today’s whipsaws.”

FTSE 100 energy stocks jump

BP and Shell both led the FTSE back into the green. BP’s shares surged seven per cent to 357p and Shell jumped 10 per cent to 1,563.4p. 

Along with other FTSE 100 energy stocks, BP and Shell’s market caps have shrunk since the oil price war began.

BP’s shares were worth 466p before the dispute, while Shell’s were worth 1,926p.

Saudi Arabia initiated the oil price war earlier this month when Russia refused to agree to more oil production cuts. Their loose alliance, dubbed Opec+, had been slashing production to shore up oil prices as coronavirus obliterated demand with travel bans.

Russia’s refusal to cut further prompted Saudi Arabia to flood the market with cheap oil, sending prices crashing.

But today Trump said he had spoken with Saudi leader Crown Prince Mohammed Bin Salman. Bin Salman said he had reached an agreement with Russian President Vladmir Putin.

“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!” Trump tweeted.

Recession risk weighs on stocks

However, markets are struggling to price the deep recession that is expected in most economies, said Paul O’Connor, head of multi-asset at Janus Henderson. 

“The scale and speed of recent revisions to consensus growth forecasts highlight the challenge of calibrating the economic dimensions of the coronavirus shock,” he said.

Asian stocks slipped overnight. Japan’s Nikkei 225 index dropped 1.4 per cent, Australia’s S&P ASX fell two per cent and Singapore’s STI fell 0.4 per cent. Yet China’s SSE rose one per cent and Hong Kong’s Hang Seng rose 0.4 per cent.

The mixed trading followed steep falls on Wall Street. Each of the major US indices fell 4.4 per cent yesterday after the Trump administration warned as many as 240,000 people could die from coronavirus.

“With the end-of-quarter portfolio rebalancing out of the way, the strengthening of the Japanese yen and the US dollar suggests that investors and traders started the new quarter in a defensive mode,” said Charalambos Pissouros, senior market analyst at JFD Group.

The US dollar and Japanese yen have risen this week as investors sell off shares in favour of holding cash due to high levels of uncertainty.

“Without such bubble wrap this Thursday, it is unclear how badly investors will take another shockingly large number.”

The situation is similar in the UK. Roughly 950,000 people have claimed for benefits via the Universal Credit system in the two weeks since Prime Minister Boris Johnson ordered people to stay at home, the government said yesterday.

Oil price bounce helps markets

Oil prices jumped this morning despite oversupply from Saudi Arabia. Brent crude was up 10.2 per cent at $27.26 per barrel. US crude was nine per cent higher at $22.13 per barrel.

Ipek Ozkardeskaya, senior market analyst at Swissquote Bank, said one reason for this was that “Saudi’s increased production is certainly countered by lower production elsewhere due to the very low oil prices”.

Higher oil prices helped push up the FTSE 100, which is dominated by oil firms such as Shell and BP.

The pound strengthened slightly against the dollar as the greenback’s run slowed this morning. It was up 0.2 per cent at $1.241.