World stock markets and oil prices rallied yesterday, fuelled by hopes for global growth following a surprise rate cut by China and as the European Central Bank indicated it would step up its asset purchases to boost the eurozone economy.
The jump in oil prices briefly took beaten-down Brent back above $80 a barrel.
US interest rates were little changed as the dollar gained and the euro declined.
Wall Street stock indices, including the Dow Jones industrial average and benchmark S&P 500 that closed at record peaks Thursday, advanced about one per cent before easing back, but remained on track for a fifth week of gains.
The Dow Jones industrial average at midday was up 108.92 points, or 0.61 per cent, to 17,827.92, the S&P 500 gained 0.56 per cent, to 2,064.31 and the Nasdaq Composite added 0.44 per cent, to 4,722.65.
European shares, oil and other growth-sensitive commodities all leapt on China’s move to cut rates to 5.6 per cent, following a string of recent data that showed its giant economy was heading for its worst year in almost a quarter of a century.
China’s rate reductions, its first in more than two years, came as ECB head Mario Draghi spoke of his determination to use more aggressive measures to ensure the eurozone doesn’t slump into a new crisis.
Both the eurozone and China have lagged the momentum of the United States, stimulus-driven Japan and faster-growing Britain over the last month, but a ramping up of the ECB’s rhetoric and Beijing’s actions will stoke hopes of a turnaround.
Germany’s DAX, France’s CAC and the FTSE Eurofirst 300 were all up between two and three per cent.
The MSCI world equity index, which tracks shares in 45 nations, was up 0.70 per cent.
The dollar index was up 0.75 per cent, as the euro gave up more than one per cent and was last at $1.2393.
The yen was up against the dollar. Japanese Finance Minister Taro Aso said yesterday the yen’s fall over the past week was “too rapid.” It was one of the strongest warnings against a weak yen since the aggressive stimulus efforts began two years ago and saw the currency leap off a seven-year low to 117.74
The rate cut by China added to a positive mood among oil traders, many of whom expect the Opec to trim production at what looks to be a landmark meeting in Vienna on November 27.
Oil jumped and Brent traded above $80 a barrel before easing, and was last up seven cents to $79.41.
Copper and gold also got a lift, with the red metal up 0.66 per cent.
Spot gold climbed back over $1,200 before moderating gains to $1,195.30 an ounce, retaining a $2 gain, as traders cheered the prospect of more global stimulus.