Global stocks boosted by crude oil, US fourth quarter GDP data – Dollar gains against major currencies; gold falls
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NEW YORK, Feb 26, (Agencies): Global equity markets gained on Friday, backed by higher prices for oil and other commodities, while data showed the US economy grew faster than expected in the fourth quarter.
US gross domestic product growth was revised higher, to a 1.0 percent annual rate, while economists were expecting it to come in at 0.4 percent.
The robust US economic report also boosted Treasury yields and the dollar.
Europe’s FTSEurofirst 300 stock index rose 2 percent, outperforming Wall Street, supported by a rally in mining shares as industrial metals such as copper and aluminium gained.
Benchmark Brent crude jumped to a seven-week high before paring gains.
With oil’s steep 1-1/2-year slide, the performance of equities has been tightly linked to the commodity’s daily fluctuations as investors say oil has been seen as a proxy for the health of the global economy.
The Dow Jones industrial average rose 56.84 points, or 0.34 percent, to 16,754.13, the S&P 500 gained 9.56 points, or 0.49 percent, to 1,961.26 and the Nasdaq Composite added 28.00 points, or 0.61 percent, to 4,610.20.
With equity markets off to a slow start in 2016 amid concerns about an economic slowdown, investors are watching the next move from the US Federal Reserve after the central bank raised rates in December.
Investors were also eyeing a meeting of officials of G20 leading economies in Shanghai, where China sought to restore confidence in its economy, the world’s second-biggest.
European equities rallied for a second day and touched a three-week high.
MSCI’s gauge of global stock markets was up 0.5 percent.
Brent crude prices were on track for their first weekly gain in a month as strong US gasoline demand and supply disruptions outweighed concerns about a fundamental glut.
Brent crude rose 3 percent to $36.34 a barrel, while US crude gained 1.8 percent to $33.67 a barrel.
Gains in oil along with the US economic data helped push US Treasury yields higher.
The dollar gained 0.9 percent against a basket of six currencies, while the euro dropped 0.9 percent against the greenback.
US
Wall Street inched higher on Friday after data showed that a slowdown in US economic growth was not as bad as expected, but gains were capped as oil prices came off sessions highs.
Gross domestic product increased at a 1 percent annual rate instead of the previously reported 0.7 percent pace. The economy grew at a rate of 2.0 percent in the third quarter.
The S&P is on track for its best two-week performance since last February, staging a recovery from one of the worst starts to a year.
At 11:11 am ET (1611 GMT), the Dow Jones industrial average was up 37.02 points, or 0.22 percent, at 16,734.31, the S&P 500 was up 7.67 points, or 0.39 percent, at 1,959.37 and the Nasdaq Composite index was up 21.98 points, or 0.48 percent, at 4,604.19.
Eight of the 10 major S&P sectors were higher, led by a 1.4 percent rise in the materials sector.
But the S&P financial sector was the biggest influence on the index as the increase in oil prices eased some worries about banks facing defaults from oil and gas companies.
Goldman Sachs provided the biggest boost to the Dow with a 1.8 percent rise, while Bank of America’s 3.3 percent increase helped lift the S&P 500.
Shares of J.C. Penney were up 12.1 percent at $9.38 after the department store operator reported better-than-expected revenue.
Gap was down 4.4 percent at $26.38 after its full-year profit forecast missed estimates.
Advancing issues outnumbered decliners on the NYSE by 1,983 to 902. On the Nasdaq, 1,612 issues rose and 887 fell.
The S&P 500 index showed 20 new 52-week highs and no new lows, while the Nasdaq recorded 33 new highs and 29 lows.
Europe
European equities rallied for a second day on Friday to reach a three-week high, as a jump in metals prices boosted miners and some encouraging company updates also supported the market.
Miners were the top performers, with the STOXX Europe 600 Basic Resources index gaining 3.9 percent following sharp gains in the prices of key industrial metals such as copper and aluminium.
Shares in Glencore, BHP Billiton and Rio Tinto rose by 3.7 to 6 percent.
They helped the pan-European FTSEurofirst 300 index gain 1.6 percent by 1454 GMT, after a 2 percent rise on Thursday, putting it on course for its second positive week in a row.
Earlier in the session, the index touched 1,312.23 points, its highest level since early February.
Oil stocks were also among the top gainers, up 3.6 percent, helped by stronger crude prices. Eni gained 5.5 percent after proposing a dividend in line with expectations in spite of a heavy fourth-quarter net loss.
Other company updates also helped the market. Spanish information technology company Amadeus was up 1.7 percent after saying it was targeting a dividend payout of 50 percent of reported profits in 2016, while Spanish wind turbine maker Gamesa rose 5.5 percent after better than expected full-year results.
UK
British shares rallied on Friday and posted a second week of gains in a row, boosted by a rally in publisher Pearson and London Stock Exchange Group , though Royal Bank of Scotland reported its eighth full-year loss in a row.
RBS shares plunged 7.1 percent and were set for their biggest daily loss since June 2012.
The state-backed bank reported a full-year loss of 1.97 billion pounds ($2.75 billion), weighed down by further restructuring and litigation costs.
RBS’s woes did not offset broader gains on the FTSE 100 index, which rose 1.4 percent to close at 6,096.01 points, posting its second weekly gain in a row.
Despite a 10 percent rally since mid-February, the index remains down 2.3 percent this year.
Education and media company Pearson plc was up 4.3 percent after posting results in line with analysts’ expectations, and saying that its restructuring should deliver profit at or above 800 million pounds in 2018.
London Stock Exchange rose 7 percent, taking gains this week to over 13 percent. Its proposed merger with Deutsche Boerse, announced on Tuesday, has been well received by investors, and on Friday the firms said that the merger was insulated from risks around Britain’s vote, scheduled for June, on whether to leave the European Union.
Mining stocks also rose, with Glencore, BHP Billiton and Rio Tinto all up between 3 to 8 percent after the price of copper firmed on Friday with the focus shifting to a G20 meeting in Shanghai.
Asia
Asian stocks rallied on Friday after China’s central bank chief said Beijing still has enough monetary firepower to keep the world’s second-largest economy on track, as G20 ministers gathered in Shanghai.
Global equities looked set for their second straight week of gains, with major bourses across Asia and Europe pushing higher after Wall Street advanced overnight.
The rally came as officials from the Group of 20 industrialised nations gathered for a two-day meeting in Shanghai, with China’s sagging growth expected to loom over the discussions.
Shanghai rose almost one percent after the head of the People’s Bank of China said the economy was strong and signalled authorities could do more to help stimulate growth.
Battered industrial metals prices rebounded, while high yielding currencies including the New Zealand dollar jumped as sentiment improved.
Tokyo added 0.30 percent after data showing inflation fell to zero in January spurred expectations the central bank could ramp up its massive bond buying programme.
“Markets are rallying ahead of the G20 meeting, boosting risk assets,” Wei Wei, an analyst at Huaxi Securities in Shanghai, told Bloomberg News.
“The risk is that investor sentiment is disappointed by the meeting’s outcome.”
Shanghai plunged more than six percent on Thursday, hit by tightening liquidity and concerns a rally that has added 10 percent since mid-January was overdone.
Chinese shares have been on a rollercoaster ride since a debt-fuelled bubble burst last year, while cooling growth in the key importer of raw materials has sent commodity and energy prices spinning.
Also in Tokyo, shares in Sharp plunged 11 percent after the parent company of Taiwan’s Foxconn delayed signing a definitive agreement to take control of the Japanese electronics maker.
Foxconn said the decision to delay was because of “new material information,” which Bloomberg News reported could include more than 300 billion yen of liabilities.
n Key figures around 0900 GMT
Tokyo — Nikkei 225: Up 0.30 percent at 16,188.41 points (close)
Shanghai — composite: Up 0.95 percent at 2,767.21 points (close)
Hong Kong — Hang Seng: Up 2.52 percent at 19,364.15 points (close)
Oil
Brent crude oil hit its highest level since early January on Friday and was on track for its first weekly gain in a month as strong US gasoline demand and supply disruptions outweighed concerns about a fundamental glut.
Brent crude futures were trading at $36.63 a barrel at 1348 GMT, up $1.34 from their last close, but rose to $36.84 earlier in the session, the highest since Jan 5. US West Texas Intermediate (WTI) crude futures were up $1.05 cents at $34.12.
The gains would mark the third consecutive daily increase for Brent and the fifth for US benchmark WTI.
Strong gasoline demand in the United States, and an upward revision to the country’s economic growth for the fourth quarter, helped boost expectations of oil consumption.
But supply disruptions in Iraq and Nigeria that have taken more than 800,000 barrels per day (bpd) of oil off the market were also underpinning prices.
Gold
Gold fell on Friday, as the dollar and shares rose, but fund buying persisted as investors expected a G20 summit would produce little in the way of a coordinated stimulus programme.
Financial leaders from G20 nations gathered in Shanghai against a backdrop of worsening economic conditions and a lack of wider consensus on how to fix the problems.
Spot gold was down 0.5 percent at $1,227.06 an ounce by 1456 GMT.
“The increase in price this year has been supported by physical purchases, very strong in the funds and concerns are more global in nature, with increasing probability that there will be a recession in the US,” Julius Baer analyst Warren Kreyzig said.
Despite Friday’s losses, gold seems to have rediscovered its role as a shelter for risk-averse investors. It has risen around 16 percent this year as share prices have tumbled and fears of a global economic slowdown increased.
It hit a one-year high of $1,260.60 this month, further supported by the repricing of expectations for US interest rate rises.
Gold funds accumulated their largest inflows since 2009 in the last week as financial market turmoil continued to unnerve investors, Bank of America Merrill Lynch said on Friday.
Assets of SPDR Gold Trust, the top bullion exchange-traded fund, rose to their highest since March 2015 on Wednesday.
The increase in ETFs this year is the highest since 2010.
Bullion is also supported by strong technicals.
Gold prices have developed a bullish technical formation called the ‘golden cross,’ where the 50-day moving average goes above the 200-day moving average.
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