Oil price up 10 pct: Lifted by resurgent stocks, US economic growth

Oil price up – highest gain since 2008

oil price

Oil price jumped on Thursday thanks to resurgent global stock markets, US economic growth. Photo: Shaun T. Polczer.

NEW YORK-┬áNorth American markets surged for a second consecutive session Thursday as investors continued to buy up stocks beaten down in a six-day sell-off that started over a week ago amid fears of a major slowdown in China’s economy.

In Toronto, the S&P/TSX composite index, up more than 460 points early in the afternoon, closed 385.08 points or 2.88 per cent higher at 13,766.67.

The resource-heavy Toronto index got a boost from a big bump in commodity prices that included a 10 per cent increase in the price of benchmark oil as the October contract shot up $3.96 to US$42.56 a barrel. That marked the biggest one-day gain for oil since March 2009.

The day got off to a strong start with a solid rebound on China’s main market and a report showing the U.S. economy expanded at a much faster pace in the second quarter than previously estimated.

Beyond that, there was simply the lower prices of stocks themselves.

“We’ve had this wholesale sell-off in the markets and it effectively went into oversold conditions and this is just buying from that oversold bottom,” said Benjamin Jang, portfolio manager, Nicola Wealth Management in Vancouver.

“So, is this a dead cat bounce or a buying opportunity. I’m not entirely sure. But overall, the reason for the sell-off, there was not a single catalyst,” said Jang, who cited concerns over China, oil prices, inflation and the possible effect of an expected increase in interest rates by U.S. Federal Reserve.

The Canadian dollar, which also shares a strong correlation with the price of oil, was up 0.59 of a cent at 75.65 cents U.S.

It also benefited from a weakening of the greenback after comments Wednesday by William Dudley, president of the New York Federal Reserve Bank, that the case for a U.S. interest rate hike in September is now “less compelling” given China’s troubles, low oil prices and emerging markets weakness.

In New York, the Dow Jones industrial average was up 369.26 points at 16,654.77 after a more than 600-point jump Wednesday, its third-biggest point gain of all time and largest since October 2008.

The broader S&P 500 index rose 47.15 points to 1,987.66 while the Nasdaq jumped 115.17 points to 4,812.71.

Elsewhere in commodities, October natural gas lost four cents to US$2.66 per thousand cubic feet, while copper reversed its slide as the December contract shot up nine cents to US$2.33 a pound. December gold retreated $2 to US$1,122.60 an ounce.

Thursday’s good news began in China, where the Shanghai index posted its biggest gain in eight weeks, rising more than two per cent.

Also cheering markets was a U.S. Commerce Department report that showed gross domestic product expanded at an annual rate of 3.7 per cent in the April-June quarter.

That was much higher than the initial estimate of 2.3 per cent and a big improvement over the 0.6 per cent advance in the first quarter and an indication that the world’s largest economy was on solid footing heading into the second half of the year.

The Canadian Press

Posted in: Energy Financial

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