World equity markets rallied, with European stocks gaining the most in more than two years, and bond prices fell yesterday as investors poured back into beaten-down markets on solid US corporate earnings and rising consumer sentiment.
Wall Street followed Europe’s lead, with all major stock indexes climbing more than one per cent after earnings reports eased fears about weak global demand’s impact on US growth and firms.
Results at General Electric, Honeywell International Inc and Morgan Stanley topped expectations. With 81 companies in the S&P reporting third-quarter results, 64.2 per cent beat expectations, just below the average over the past four quarters, but better than the 20-year average.
GE rose 3.3 per cent to $25.05, Honeywell gained 3.6 per cent to $89.49 and Morgan Stanley advanced 3.1 per cent to $33.53.
US housing starts and permits rose in September, a sign the market’s modest recovery is supporting a growing economy, while US consumer sentiment rose in October to the highest in more than seven years, a Thomson Reuters/University of Michigan preliminary reading for the month showed.
Despite the rally, the S&P 500 index was on track for a fourth straight weekly decline, its longest streak in over three years.
The US benchmark is down more than seven per cent from a record high in September as concerns about the global economy, a resurgent European debt crisis and the Ebola virus led to a furious downturn.
MSCI’s all-country world index rose 1.3 per cent, while the FTSEurofirst 300 index of top European shares rose 2.52 per cent to 1,277.14, its biggest gain by percentage since June 2012.
Although some nervousness remained, reassuring words from US and European policymakers, better US data and beaten-down prices after another big week of equity and commodity declines, drew buyers into the market.
The US dollar edged higher. The euro was last down 0.32 per cent against the dollar at $1.2766, just off a session low of $1.2755. The dollar was up 0.36 per cent against the yen at 106.70 yen.
Brent crude oil rose above $86 a barrel, bouncing from near four-year lows as investors bought back into a market they said was oversold, and as fighting in Iraq increased political risk.
Brent for December rose 48 cents to a high of $86.30. US November crude, heading for its third weekly decline, was up 86 cents at $83.56.
US Treasuries prices posted their second straight day of declines. Benchmark 10-year notes, which rose by as much as three points on Wednesday on fears over the global economy, were off 19/32 in price yesterday to yield 2.22 per cent.