A recovery in technology stocks following IBM Corp’s $34 billion deal to buy Red Hat Inc and Standard & Poor’s decision to leave Italy’s ratings level unchanged helped global stocks rebound yesterday after choppy sessions last week.
The signs of increased mergers and acquisitions activity helped start the trading week on a positive note, said Art Hogan, chief market strategist at B. Riley FBR in New York.
“Investors are coming in today from an oversold market last week,” he said.
“Markets are set to have a positive reaction to any form of good news.”
The Dow Jones Industrial Average rose 204.88 points, or 0.83 per cent, to 24,893.19, the S&P 500 gained 27.3 points, or 1.03 per cent, to 2,685.99 and the Nasdaq Composite added 41.65 points, or 0.58 per cent, to 7,208.86.
The gains came after shares in Europe rose broadly following Standard & Poor’s decision to leave Italy’s sovereign rating unchanged, prompting relief there was no ratings downgrade.
The MSCI world equity index extended early gains to rise 0.4 per cent. The index is down 9.3 per cent so far this month and has shed $6.7 trillion in market value since its January peak.
Europe’s autos sector jumped 4.9 per cent, its strongest day since August 2015, after a report that China was considering halving the tax on car purchases in an attempt to boost demand for autos, which has been hurt by a trade war and slowing economic growth.
In the United States, automakers Ford Motors Co and General Motors Co both gained more than 4 per cent. Despite gains yesterday, investors remained wary of betting on a turnaround in risk.
“The only way I can summarize the core sentiment among the European investors I met is something like ‘pretty grim’,” wrote Erik Nielsen, group chief economist at UniCredit, in a note to clients.
Asian stock trading was dampened by China’s blue-chip index which tumbled more than 3.3 per cent. Chinese data underscored worries of a cooling economy as profit growth at its industrial firms slowed for the fifth consecutive month in September due to ebbing sales of raw materials and manufactured goods.
Many indices are already in official correction territory amid heightened worries over corporate earnings and global growth.
Analysts have been downgrading their estimates for European earnings at the fastest pace since February 2016, and weak results from internet companies Amazon.com Inc and Alphabet Inc hurt US stocks at the end of last week.
Benchmark 10-year notes last fell 9/32 in price to yield 3.1075 per cent, from 3.076 per cent late on Friday.
US crude fell 0.74 per cent to $67.09 per barrel and Brent was last at $77.32, down 0.39 per cent on the day.