Tech re­cov­ery helps global stocks re­bound

The Gulf Today - Business - - FRONT PAGE -

NEW YORK: A re­cov­ery in tech­nol­ogy stocks fol­low­ing IBM Corp’s $34 bil­lion deal to buy Red Hat and Stan­dard & Poor’s de­ci­sion to leave Italy’s rat­ings level un­changed helped global stocks re­bound on Mon­day af­ter choppy ses­sions last week.

The signs of in­creased merg­ers and ac­qui­si­tions ac­tiv­ity helped start the trad­ing week on a pos­i­tive note, said Art Ho­gan, chief mar­ket strate­gist at B. Ri­ley FBR in New York.

“In­vestors are com­ing in to­day from an over­sold mar­ket last week,” he said. “Mar­kets are set to have a pos­i­tive re­ac­tion to any form of good news.” The Dow Jones In­dus­trial Av­er­age rose 204.88 points, or 0.83 per cent, to 24,893.19, the S&P 500 gained 27.3 points, or 1.03 per cent, to 2,685.99 and the Nas­daq Com­pos­ite added 41.65 points, or 0.58 per cent, to 7,208.86.

The gains came af­ter shares in Europe rose broadly fol­low­ing Stan­dard & Poor’s de­ci­sion to leave Italy’s sov­er­eign rat­ing un­changed, prompt­ing re­lief there was no rat­ings down­grade.

The MSCI world eq­uity index ex­tended early gains to rise 0.4 per cent. The index is down 9.3 per cent so far this month and has shed $6.7 tril­lion in mar­ket value since its Jan­uary peak.

Europe’s au­tos sec­tor jumped 4.9 per cent, its strong­est day since Au­gust 2015, af­ter a re­port that China was con­sid­er­ing halv­ing the tax on car pur­chases in an at­tempt to boost de­mand for au­tos, which has been hurt by a trade war and slow­ing eco­nomic growth.

In the United States, au­tomak­ers Ford Mo­tors Co and Gen­eral Mo­tors Co both gained more than 4 per cent.

De­spite gains on Mon­day, in­vestors re­mained wary of bet­ting on a turn­around in risk.

“The only way I can sum­ma­rize the core sen­ti­ment among the Euro­pean in­vestors I met is some­thing like ‘pretty grim’,” wrote Erik Nielsen, group chief econ­o­mist at Unicredit, in a note to clients.

Asian stock trad­ing was damp­ened by China’s blue-chip index which tum­bled more than 3.3 per cent. Chi­nese data un­der­scored wor­ries of a cool­ing econ­omy as profit growth at its in­dus­trial firms slowed for the fifth con­sec­u­tive month in Septem­ber due to ebbing sales of raw ma­te­ri­als and man­u­fac­tured goods.

Many in­dices are al­ready in of­fi­cial cor­rec­tion ter­ri­tory amid height­ened wor­ries over cor­po­rate earn­ings and global growth.

“With the volatil­ity of the last week or so, to­day’s stronger open to mar­kets should not be seen as a sea change but more a pause for breath,” said Ed­ward Park, in­vest­ment di­rec­tor at Brooks Macdon­ald.

An­a­lysts have been down­grad­ing their es­ti­mates for Euro­pean earn­ings at the fastest pace since Fe­bru­ary 2016, and weak re­sults from in­ter­net com­pa­nies Amazon. com Inc and Al­pha­bet Inc hurt US stocks at the end of last week.

An in­vestor walks in front of a pri­vate stock trad­ing board in Kuala Lumpur on Mon­day.

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