A delay in potential US military action in Syria and improving economic data from China and Europe lifted world share markets yesterday and sent safe-haven government bonds, gold and the Japanese yen lower.
Prospects for the global economy have brightened considerably according to a fresh round of purchasing managers’ surveys for August, which provide a guide to future levels of economic activity.
The recent signs of improvement also continued in the eurozone where factory activity rose at its fastest pace in over two years, and manufacturing in struggling Spain grew for the first time since April 2011.
Europe’s broad FTSEurofirst 300 share index ended up 1.8 per cent, on course for its biggest one-day jump since the start of July as the data, which was particularly strong in the UK, also lifted sterling.
In the United States, stock futures rose on the delay in action on Syria. S&P 500 futures rose 16.5 points. Dow Jones industrial average futures added 117 points and Nasdaq 100 futures rose 35.5 points.
Oil prices rebounded on the brighter economic outlook, after falling initially following US President Barack Obama’s decision to rule out military action against Syria until lawmakers have had a chance to vote on the plan.
“Oil would have been pushed lower had it not been for the China data,” said Ben Le Brun, market analyst at OptionsXpress. “The market is keeping an eye on the Middle East and developments in Syria, but we have seen some tensions easing.”
By mid afternoon in Europe, Brent crude was slightly firmer at $114 per barrel after shedding more than a $1 in Asian trading.
Gold was down 0.2 per cent at $1,389.40 an ounce while 10-year German government bonds, another traditional refuge for nervous investors, fell sharply, pushing the yield up 6 basis points and back towards a one-and-a-half high hit last month.
Many investors were also wary of taking action ahead of major central bank meetings later in the week and the important US payrolls report on Friday.
The jobs data could influence markets’ view on when the Federal Reserve is likely to start scaling back stimulus, which has helped drive equity markets higher.