Global equity markets gained yesterday, backed by higher prices for oil and other commodities, while data showed the US economy grew faster than expected in the fourth quarter.
US gross domestic product growth was revised higher, to a one per cent annual rate, while economists were expecting it to come in at 0.4 per cent. The robust US economic report also boosted Treasury yields and the dollar.
Europe’s FTSEurofirst 300 stock index rose two per cent, outperforming Wall Street, supported by a rally in mining shares as industrial metals such as copper and aluminium gained.
Benchmark Brent crude jumped to a seven-week high before paring gains.
With oil’s steep 1-1/2-year slide, the performance of equities has been tightly linked to the commodity’s daily fluctuations as investors say oil has been seen as a proxy for the health of the global economy.
“Today’s market is going to be all about oil and economic data,” said Peter Cardillo, chief market economist at First Standard Financial in New York.
The Dow Jones industrial average rose 56.84 points, or 0.34 per cent, to 16,754.13, the S&P 500 gained 9.56 points, or 0.49 per cent, to 1,961.26 and the Nasdaq Composite added 28.00 points, or 0.61 per cent, to 4,610.20.
With equity markets off to a slow start in 2016 amid concerns about an economic slowdown, investors are watching the next move from the US Federal Reserve after the central bank raised rates in December.
Yesterday’s encouraging economic data may be interpreted by investors as raising the chances for a rate hike, potentially pressuring stocks, said Walter Todd, chief investment officer with Greenwood Capital in South Carolina.
“I think better economic data is good regardless, but the market is nervous about the Fed moving too quickly,” Mr Todd said.
Investors were also eyeing a meeting of officials of G20 leading economies in Shanghai, where China sought to restore confidence in its economy, the world’s second-biggest.
European equities rallied for a second day and touched a three-week high. MSCI’s gauge of global stock markets was up 0.5 percent.
Brent crude prices were on track for their first weekly gain in a month as strong US gasoline demand and supply disruptions outweighed concerns about a fundamental glut.
Brent crude rose three per cent to $36.34 a barrel, while US crude gained 1.8 per cent to $33.67 a barrel. Gains in oil along with the US economic data helped push US Treasury yields higher.
The dollar gained 0.9 per cent against a basket of six currencies, while the euro dropped 0.9 per cent against the greenback.