Stock markets rally as oil rises to $32 a barrel
- 27 January 2016
- From the section Business
European markets closed higher and Wall Street rallied as oil jumped almost 5% on hopes for a deal to tackle the global crude glut.
The FTSE 100 in London ended 0.6% higher at 5,911 points, while Frankfurt and Paris both added about 1%.
Europe had followed Asia lower earlier after Shanghai tumbled 6.4% to its lowest close since December 2014.
The Dow Jones industrial average surged 1.8%, while the S&P 500 closed 1.4% higher.
Oil made gains on hopes that both Opec and non-Opec producers would take action to tackle oversupply, after Opec on Monday called for co-operation from oil producing nations outside the cartel.
Share markets have had a rocky start to the year as worries over slowing economic growth in China have intensified, while commodity prices have also been buffeted.
Although China's economy is still expanding, the pace of growth is slowing, reducing demand for products such as coal and iron ore and thus their prices.
Oil prices were hit again earlier on Tuesday by figures from China showing annual rail freight volume - a key economic indicator - fell 11.9% last year, compared with a decline of 3.9% in 2014.
Daniel Ang, an analyst with Phillip Futures in Singapore, said demand remained weak: "It is going to be very difficult to maintain higher prices."
"Wherever you look - China, oil and the US, there is no clear evidence of improvement in economic fundamentals," said Tatsushi Maeno, managing director at PineBridge Investments.
'Series of slumps'
Commenting on the Shanghai slide, Kaiyuan Securities analyst Yang Hai said: "We've seen another stampede driven by panic."
Rabobank's Michael Every said: "It's just another in a long series of slumps that we have seen in this market, and it's not the last we will see either because the market is still overpriced. And too many people want to get their money out - it's been a bubble since it began last summer."
He expected Shanghai, China's top mainland stock market, to fall a further 10% before stabilising.
The index has already fallen about 17% this year.
On the FTSE 100, the top risers were all miners, including Anglo American, Glencore and Randgold Resources.
Gold rallied to its highest level since November, up 1% at $1,114.70 an ounce. The safe-haven commodity has risen nearly 5% this year, after sliding more than 10% in 2015.
The US Federal Reserve's rate-setting committee starts a two-day policy meeting on Tuesday and is not expected to make any change.
Meanwhile, Chinese state media have warned billionaire investor George Soros against betting on falls in the yuan or the Hong Kong dollar.
Soros, who made more than $1bn from shorting sterling in 1992, has said he was betting against the S&P 500, commodity-producing countries and Asian currencies, although he has not specifically mentioned the yuan or Hong Kong dollar.
China's central bank has been making plenty of liquidity available to the banking system to avoid any cash squeeze ahead of the long Lunar New Year holiday early next month.
Traders said that the bank would inject 440bn yuan (£46bn) into the money markets, the biggest daily injection in three years.