A rebound on Wall Street buoyed global equity markets yesterday, but lingering anxiety over world economic growth pushed more investors into safe-haven US and German debt and slammed oil prices again.
Worries about a slowing global economy and fears of Ebola have made markets more volatile.
The CBOE Volatility Index, or VIX, the market’s preferred gauge of anxiety, hit a high on Monday not seen since early June 2012.
With Wall Street rebounding, the VIX fell nine per cent to 22.39.
An MSCI gauge of major stocks worldwide was up 0.3 per cent after hitting an eight-month low earlier in the session.
Investors have turned more defensive due to worries about the US Federal Reserve ending its bond-buying stimulus later this month, mounting risks of recession in the eurozone and a floundering Japanese economy.
These fears have pushed US and German bond prices higher. The German Economy Ministry sharply cut its forecasts for economic growth for 2014 and 2015, and business sentiment fell in Europe’s largest economy.
Benchmark US Treasuries yields fell as low as 2.176 per cent, lowest in 16 months, while yields on German 10-year debt dropped to a record low.
Brent crude slid below $87 a barrel after the International Energy Agency cut estimates for oil demand this year and next. It was Brent’s lowest price since late 2010.
The Dow Jones industrial average rose 127.52 points, or 0.78 per cent, to 16,448.59, the S&P 500 gained 20.36 points, or 1.09 per cent, to 1,895.1 and the Nasdaq Composite added 58.55 points, or 1.39 per cent, to 4,272.21.
The US dollar bounced back as the euro sank after soft data including below-forecast readings on eurozone industrial output and the ZEW indicator of German investor sentiment.
The dollar index, which measures the US currency against a basket of others, rebounded a day after its largest one-day drop in a year.
The euro handed back almost all the previous day’s one per cent rise against the dollar after unexpectedly sharp declines in industrial output and investor morale underlined economic frailty and falling prices.
Gold retreated from four-week highs as the US dollar strengthened and data showed inflation running far below targets in various European countries. Spot gold last traded at $1,234.45 an ounce, down 0.2 per cent.