Stock markets around the world rallied yesterday and crude oil rebounded sharply after strong US economic data and hints from a US Federal Reserve policymaker that a September interest rate hike was unlikely.

All three major US indexes rose more than two per cent in afternoon trade, putting them higher for the week, and increased appetite for risk sent government bond prices and the Japanese yen down while the dollar advanced.

Annual US gross domestic product growth was revised to 3.7 per cent from the 2.3 per cent rate reported last month and last week’s jobless claims fell more than expected.

New York Fed President William Dudley had said Wednesday that arguments for a September rate increase “seems less compelling” than only weeks ago, given the threat posed to the US economy by recent market turmoil.

The Dow Jones industrial average was up 364.78 points, or 2.24 per cent, at 16,650.29, the S&P 500 gained 47.36 points, or 2.44 per cent, to 1,987.87 and the Nasdaq Composite added 115.17 points, or 2.45 per cent, to 4,812.71.

Markets around the world plunged earlier in the week as a slump in Shanghai shares fuelled worries over China’s economic health. While Beijing moved to ease policy late on Tuesday, stocks still ended weak that day, but Wall Street staged a strong comeback late Wednesday and its biggest daily gain in four years helped to calm investor nerves overseas.

In Europe the FTSEuroFirst index of leading European companies closed up 3.6 per cent. Germany’s DAX , France’s CAC 40 and Britain’s FTSE 100 also climbed more than 3 per cent.

The two main Chinese indices surged 5.3 per cent and 5.9 per cent yesterday, snapping a five-day losing streak that had wiped around 20 per cent in market value and sent tremors around global financial markets.

US Treasuries prices fell with most yields rising to one-week highs after the government upgraded its reading on second-quarter economic growth.

Dudley’s comments came amid alarming market volatility and as investors watch a annual meeting of the world’s top central bankers in Jackson Hole, Wyoming for clues on how the turmoil may shake up policy plans.

Emerging markets stocks and currencies rebounded with MSCI’s benchmark emerging market stocks index up 3.5 per cent.

Ukraine’s central bank became the 39th monetary authority to ease policy this year, cutting interest rates to 27 per cent from 30 per cent to support flagging growth. Ukraine also reached a deal to restructure $18 billion of debt.

The dollar advanced for a third consecutive session bolstered by gains in global equities as well as the US data. The dollar index, which measures the greenback against a basket of major currencies, was up 0.7 per cent Thursday afternoon.

Crude oil rocketed more than 8 per cent in a snap-back from a deep two-month slump as stock market rallies and news of diminished oil supplies drove a short-covering surge.

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