Global stocks rally as global slow­down fears fade

The Pak Banker - - MARKETS/SPORTS -

World shares and bond yields rose on Wed­nes­day as the re­cent re­cov­ery in oil prices and a batch of pos­i­tive eco­nomic data from Aus­tralia to the United States calmed fears of a global eco­nomic slow­down.

Asian stocks hit a two-month high, Ja­pan's and China's main indices both rose more than 4 per­cent, and Euro­pean mar­kets were up for the fifth day in a row, on track for their long­est win­ning streak in five months.

In­vestors shrugged off fur­ther signs of weak­ness in global man­u­fac­tur­ing, tak­ing their cue in­stead from other in­di­ca­tors point­ing to pock­ets of light amid the re­cent eco­nomic gloom such as U.S. con­struc­tion spend­ing, and Aus­tralian and Swiss GDP.

"Stocks are trad­ing higher as Aus­tralian and Swiss growth fig­ures came in bet­ter than ex­pected. Euro­pean mar­kets have opened in the green and U.S. stocks will cer­tainly ben­e­fit from the global risk-on trad­ing," said Ipek Ozkardeskaya, mar­ket strate­gist at Lon­don Cap­i­tal Group.

In early Euro­pean trade the FTSEuroFirst in­dex of lead­ing 300 shares was up 0.7 per­cent at 1,3412 points .FTEU3, on track for its fifth straight day of gains.

FTSE 100 FTSE was up 0.6 per­cent, Ger­many's DAX GDAXI up by 1 per­cent, with France's CAC .FCHI up 0.8 per­cent.

In­vestors also con­tin­ued to take heart from an­nounce­ments from China ear­lier this week of a cut in bank re­serve re­quire­ments and struc­tural re­forms to the world's eco­nomic growth en­gine.

Ja­pan's Nikkei .N225 was up 4 per­cent, Hong Kong's HangSeng In­dex .HSI rose 3 per­cent and China's main bourses had their best day so far this year, ris­ing more than 4 per­cent .SSEC .CSI300.

MSCI's broad­est in­dex of Asia-Pa­cific shares out­side Ja­pan rose 2.4 per­cent to its high­est lev­els since Jan­uary. 7, and build­ing on gains in the pre­vi­ous ses­sion. MSCI's broad­est gauge of the world's stock mar­kets also rose to high­est level in al­most two months.

The In­sti­tute for Sup­ply Man­age­ment's (ISM) in­dex of U.S. fac­tory ac­tiv­ity, a closely watched mea­sure of the Amer­i­can man­u­fac­tur­ing sec­tor, rose more than ex­pected last month. It also edged up for two months in a row, ap­pear­ing to have snapped its al­most con­tin­u­ous de­cline since late 2014. U.S. con­struc­tion spend­ing rose to the high­est level since Oc­to­ber 2007 while solid GDP data from Canada and Aus­tralia and Switzer­land on Wed­nes­day helped.

The data helped lift the U.S. S&P 500 In­dex .SPX 2.39 per­cent to an eight-week high of 1,978.35. Stock fu­tures pointed to a broadly flat open on Wall Street. It also lifted ex­pec­ta­tions of a U.S. rate in­crease this year with in­ter­est rate fu­tures ef­fec­tively pric­ing in a full chance of a rate hike this year. Even Moody's down­grade of its out­look on Chi­nese govern­ment debt to "neg­a­tive" from "sta­ble" failed to punc­ture the re­newed sense of cau­tious op­ti­mism.

If any­thing, in­vestors are tak­ing heart from the prospect of more stim­u­lus from Bei­jing in the com­ing weeks, as well as the Euro­pean Cen­tral Bank as early as next week.

"The count­down to the ECB meet­ing be­gins and the poor in­fla­tion and core in­fla­tion num­bers from the euro zone points to more eas­ing from (ECB pres­i­dent) Mario Draghi," said David Madden, mar­ket an­a­lyst at IG in Lon­don. In­vestors un­wound bets in safe-haven as­sets such as govern­ment bonds, with the 10-year U.S. Trea­suries yield ris­ing to a two-week high of 1.84 per­cent.

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