US and European shares rebounded from recent weakness yesterday, with reassuring US retail sales data boosting sentiment, while US crude prices rallied from more than 12-year lows.
Banking shares in the United States and Europe spiked, with the S&P financial index last up 2.9 per cent and the STOXX 600 Europe Banks index gaining 4.7 per cent.
The benchmark US S&P 500 gained over one per cent after five days of losses that had dropped it to its lowest level in two years on Thursday. In Europe, gains of about 10 per cent in shares of Deutsche Bank and its rival Commerzbank helped European stocks rebound.
The FTSEurofirst 300 index of top European shares was on track to notch its biggest daily gain in three weeks after hitting a two-and-a-half-year low on Thursday.
The S&P financial index has fallen 16 per cent this year, and the European bank index over 25 per cent, as worries over the impact of central banks’ negative interest rate policies on banks’ profitability intensified in recent days.
Commerce Department data showing US retail sales excluding automobiles, gasoline, building materials and food services increased 0.6 per cent in January also boosted optimism.
Despite the rise in European stocks, an overnight drop in Asia shares limited gains in MSCI’s all-country world equity index. The index rose 1.32 points, or 0.37 per cent, to 354.67. On Thursday it had closed more than 20 per cent below its all-time high, confirming a bear market in equity prices.
The Dow Jones industrial average rose 246.95 points, or 1.58 per cent, to 15,907.13, the S&P 500 gained 29.53 points, or 1.61 per cent, to 1,858.61 and the Nasdaq Composite added 62.06 points, or 1.45 per cent, to 4,328.89. Europe’s broad FTSEurofirst 300 index added 2.8 per cent, at 1,229.55.
Gains of more than two per cent in the S&P energy index were also a boost. Crude oil jumped on prospects for a coordinated production cut sparked by comments from the energy minister of Opec member United Arab Emirates.
US crude prices were last up $2.82 at $29.03 per barrel after hitting $26.05 a barrel on Thursday, lowest in more than 12 years. Brent crude was last up $2.27 at $32.33 a barrel.
Safe-haven 10-year US Treasury notes were last down 22/32 in price to yield 1.72 per cent after hitting 1.53 per cent on Thursday, which marked their lowest yield since August 2012.
The dollar rose against a basket of major currencies after the US retail sales data. The dollar index, which measures the greenback against a basket of six rivals, was last up 0.53 per cent.
Spot gold was last down $10.95 at $1,235.56 an ounce but was still set for its best week in four years.