Biggest jump in a month for stocks as oil price rises

Saudi Arabia and Russia have agreed to co-operate in oil markets, sending oil prices higher and world stocks up in hopes the two top producers would work together to tackle a global glut.

LONDON (REUTERS) - World shares had their biggest jump in over a month on Monday as a pact between Saudi Arabia and Russia sent oil prices surging and lacklustre United States jobs figures pushed back Federal Reserve interest rate rise expectations.

European stocks touched an eight-month high as oil and mining firms cheered what at one point was a 5 per cent leap in crude prices.

Saudi Arabia and Russia, two of world's top oil producers, announced at a meeting of global leaders in China that they would start working together to stabilise the market, including limiting output. "Freezing production is one of the preferred possibilities,"Saudi Energy Minister Khalid al-Falih said speaking alongside Russian counterpart Alexander Novak. "But it does not have to happen specifically today." Oil eventually halved its initial gains as traders noted the lack of immediate measures, but the buoyant mood elsewhere remained intact.

Bonds were in favour after US payrolls numbers on Friday had tamed Fed bulls, while emerging market stocks were gunning for their best day since July as they climbed 1.3 per cent. "We don't expect the Fed to do anything until next year so that lays the ground for further advances," said TD Securities strategist Paul Fage.

Though the Fed reaction and oil price surge were the markets' main drivers, they were not the only factors in play.

The yen turned around its recent losing streak as the head of the Bank of Japan disappointed investors who had expected clearer signals that Tokyo's monetary policy would be eased further this month.

Though Bank of Japan Governor Haruhiko Kuroda signalled its already massive stimulus programme would continue, there was nothing explicit enough to suggest an expansion is imminent. Later Japan PM Shinzo Abe said he trusted Kuroda to "take the right steps".

US markets were closed for a Labour Day public holiday meaning there was no trading on Wall Street.

Oil's rise was its the second bumper session in a row as the Saudi/Russia pact fanned speculation that major producers could strike a firmer deal in Algeria later this month.