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Global stocks rally as G7 backs Russian oil price cap

·Reporter
·4-min read
G7 leaders. Global stocks climbed on Friday as finance ministered agreed to cap Russian oil price. Photo: John MacDougall/POOL/AFP via Getty
G7 leaders. Global stocks climbed on Friday as finance ministered agreed to cap Russian oil price. Photo: John MacDougall/POOL/AFP via Getty

Global stocks pushed higher on Friday, clawing back some losses following a sharp sell-off, as the G7 backed a Russian oil price cap in a blow for Russian president Vladimir Putin.

In London, the FTSE 100 (^FTSE) rose 1.8% in afternoon trade, the CAC (^FCHI) was 2.3% higher in Paris and Frankfurt's DAX (^GDAXI) added 3.2% on the day.

Britain's chancellor of the exchequer, Nadhim Zahawi said: "Since Putin’s brutal and unprovoked invasion of Ukraine, the UK and our allies have imposed hugely damaging sanctions on the Kremlin war machine, pushing the Russian economy into a deep recession and putting the majority of Russia’s $640bn (£552.5bn) foreign exchange reserves beyond use.

"We are united against this barbaric aggression and will do all we can to support Ukraine as they fight for sovereignty, democracy and freedom."

Read more: UK economy faces recession before year end

It comes as the group of seven richest countries (G7) agreed on a global price cap on purchases of Russian oil in a bid to ease the global energy crisis and slash the Kremlin's revenues.

In a joint statement released on Friday, the G7 pledged to ban the transportation of all Russian crude sold above a certain price.

The finance ministers said they planned to implement the cap in line with European Union sanctions announced earlier this year on Kremlin oil, which are set to kick in on 5 December.

The statement, which notes that all EU member states will have to sign off on any embargo changes, didn’t provide a dollar range for the eventual price cap.

The plan would allow buyers of Russian crude, under a capped price, to continue getting crucial services like financing and insurance for tankers.

Additionally European Commission president Ursula von der Leyen said the bloc should impose a price cap on Russian pipeline gas to limit what she described as Putin's attempts to manipulate the energy market.

Von Der Leyen also called for measures to remove some windfall profits that electricity suppliers have made from the gas crisis, using the money to support vulnerable households and companies.

Oil prices declined slightly as traders grappled with the implications of the cap, with brent crude (BZ=F) down to $94.84 per barrel, and US light crude (CL=F) falling to $88.04.

Meanwhile, the pound (GBUSD=X) was trading near its lowest level since March 2020 against the dollar amid expectations that higher energy bills will deepen the cost of living crisis.

Sterling was up 0.1% to $1.1553 against the greenback, and was down 0.3% to €1.15 against the euro (GBPEUR=X).

Across the pond, US benchmarks snapped a losing streak on Friday, providing a slight respite for battered indices after jobs data showed some signs of easing in the labour market of the world's biggest economy.

Wall Street’s S&P 500 (^GSPC) advanced 46.85 points, or 1.2%, to 4013.70. The tech-heavy Nasdaq (^IXIC) was 1.1% higher, while the Dow Jones (^DJI) added 1.1% at London's close.

US employers added 315,000 jobs last month, slightly above what economists expected. Wage growth slowed as more Americans entered the work force, potentially signalling some softening in demand.

The unemployment rate unexpectedly rose to 3.7% as the participation rate climbed, according to Labor Department data.

"Another bout of Friday volatility has swept over financial markets from the US, with the latest jobs report helping to reverse some of the damage done by Jerome Powell last week," Joshua Mahony, senior market analyst at online trading platform IG said. "Higher than expected payrolls, wage growth and unemployment may have helped lift risk assets, but the wider bearish sentiment looks likely to shine through soon enough."

Asian stocks finished mixed overnight, with the Nikkei (^N225) closing flat in Tokyo, while the Hang Seng (^HSI) shed 0.7% in Hong Kong and the Shanghai Composite (000001.SS) gained 0.1%.

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