US open: Oil price rebound and stimulus hopes boost stocks

US stocks gained on Friday as oil prices recovered and speculation of further stimulus in Japan and in Europe gave global equity markets a boost.

The Dow Jones Industrial Average rose 1.27%, the Nasdaq increased 1.85% and S&P 500 climbed 1.55% at 1435 GMT.

Oil prices bounced back above the $30 per barrel level on Friday following declines earlier in the week. West Texas Intermediate jumped 4.7% to $31.01 per barrel and Brent crude surged 5.8% to $31.06 per barrel at 1415 GMT.

“While it’s too early to suggest oil prices have bottomed – and personally I think we’re going to see them closer to $20 before that happens barring a fundamental change – oil is very oversold and now appears to have entered into a correction period,” said Craig Erlam, senior market analyst at Oanda.

“Given how fierce the sell-off has been until now, it will be interesting to see just how far these rallies are allowed to run before sellers see value once again.”

In a note to clients on Friday, Moody’s lowered its 2016 price estimate for both Brent and WTI crude to $33 per barrel amid an oversupplied market. For Brent, that marked a $10 per barrel reduction from the rating agency's previous estimate, and for WTI, a $7 per barrel reduction.

European Central Bank President Mario Draghi on Thursday said that amid recent falls in oil prices inflation would remain very low or negative in coming months. For this reason, he said the monetary authority would reconsider its monetary policy at its early March meeting when macroeconomic projections became available.

Hopes of further stimulus in Japan were raised after Prime Minister Shinzo Abe’s aide on Thursday said that “conditions for additional easing have fallen into place”. The Bank of Japan meets on 28-29 January when it is expected to increase asset purchases. The remarks sent Japan’s Nikkei up 5.88% at the close, with other Asian stocks following suit.

Meanwhile, billionaire investor George Soros warned at the World Economic Forum in Davos that China was already undergoing a 'hard landing' and that the US Federal Reserve would not raise interest rates again this year.

In the US, Markit’s purchasing managers’ index on manufacturing activity is due at 1445 GMT while a report on existing home sales will be published at 1500 GMT.

On the company front, shares in Boeing rose despite news that the plane maker will cut production of its 747-8 jumbo jet in half and take a charge of $569 (£397m) in its fourth quarter. The company said demand and global passenger traffic remained strong.

Oilfield services group Schlumberger jumped after announcing it slashed 10,000 jobs in the last three months amid a slump in oil prices.

Alaska Air Group was given a boost from Deutsche Bank which upgraded the stock to ‘buy’ from ‘neutral’.

General Electric declined after reporting far weaker than expected quarterly sales of $33.8bn (consensus: $35.96bn).

SunTrust Banks climbed after saying earnings per share improved to 91 cents in its latest quarter, well up on the 72 cents achieved a year earlier.

The US dollar fell 0.74% against the pound but rose 0.53% versus the euro and 0.52% versus the yen.