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A wild rally in oil points to stellar gains for battered oil companies and a positive start for the broader market after Wall Street pushed higher.

Australian index futures rallied 114 points or 2.2 per cent to 5214, indicating the ASX 200 could reclaim all of yesterday’s 104-point fall at today’s open. 

Oil surged more than 20 per cent, eclipsing news of a massive jump in US unemployment, after President Donald Trump claimed Saudi Arabia and Russia will cut production to boost prices. Double-digit gains in US oil majors helped lift the S&P 500 56 points or 2.28 per cent. The Dow put on 470 points or 2.24 per cent and the Nasdaq 127 points or 1.72 per cent.

Trump said he expected Saudi Arabia and Russia to reduce crude production by up to 15 million barrels a day. The claims followed conversations he had with the crown prince of Saudi Arabia and Russian President Vladimir Putin, whom Trump said had also spoken to each other. However, a Kremlin spokesman denied Putin had spoken to the crown prince. Market analysts were sceptical that either nation would make such deep production cuts (around 10-15 per cent of global supply) without the participation of other producers. Saudi Arabia later called for an urgent meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies.

Brent crude settled $5.20 or 21 per cent higher at US$29.94 a barrel. The US benchmark, West Texas Intermediate, climbed $5.01 or 24.7 per cent to US$25.32.

The US energy sector charged 9.1 per cent as Chevron gained 11 per cent, Apache 16.7 per cent and Exxon Mobil 7.7 per cent. Trump was set to meet with leading oil industry executives later today. Several US shale oil companies are reportedly on the brink of bankruptcy after the collapse in the oil price left them unable to service debts.

The oil drama overshadowed shocking jobs news. Initial claims for unemployment benefits surged to more than 6.6 million last week as the coronavirus lockdown threw millions out of work. Last week’s rise means 10 million Americans – around 6 per cent of the total workforce – lost their jobs in two weeks.

“Sadly, this probably still underestimates the actual numbers because of the overload in the systems and not every call getting through,” Liz Ann Sonders, chief investment strategist at Charles Schwab, told CNBC. “Even if we’re accurately calculating the numbers, we still likely have worse to come.”

Last night’s rally helped Wall Street steady after a jittery start to the new quarter. The S&P 500 and Dow both slumped 4.4 per cent on Wednesday after President Trump warned Americans to prepare for a “very, very painful two weeks” as the death toll from the Covid-19 pandemic rises. Overnight, the number of infections around the globe passed a million and the death toll blew through 51,000.

BHP’s oil interests helped it outperform rival Rio Tinto in overseas action. The Big Australia’s US-listed stock put on 5.66 per cent and its UK-listed stock 3.98 per cent. Rio Tinto added 4.19 per cent in the US and 3.17 per cent in the UK. The spot price for iron ore landed in China improved $1.50 or 1.8 per cent to US$83.50 a dry ton.

Gold lodged its first rise in five sessions after the bleak jobs data confirmed the souring outlook for assets tied to economic growth. Gold for June delivery settled $46.30 or 2.9 per cent higher at US$1,637.70 an ounce.

The dollar eased 0.25 per cent to US 60.55 cents.

The day ahead brings March construction and February retail figures. A private measure of Chinese services activity is due around mid-session. Tonight’s big-ticket item on Wall Street is the March employment report, which is expected to show the early impact of virus lay-offs.   

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