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Robust earnings boost equity markets after brutal month

Robust corporate results helped world stock markets surge yesterday, bringing some relief to jittery investors after a brutal October that saw equities suffer one of their worst drops since the financial crisis ten years ago.

Strong earnings reports in the US and Europe spurred a broad rally, despite data showing that China’s factory growth slowed to its lowest in two years. Investors rushed into the US dollar, sending it to a 16-month high while the offshore Chinese yuan languished at a 22-month low.

The MSCI world equity index, which tracks shares in 47 countries, rose 0.6 per cent, but remains down 8.2 per cent in October, its worst month since 2012. The index has dropped 13 per cent from all-time highs hit in January.

Still, despite the broad rally, investors remained cautious.

“Ultimately I’m still of the belief that we are in for more downside and rallies are for selling, but squeezes in bear markets are not normally comfortable affairs,” said Neil Campling, co-head of the global thematic group at Mirabaud Securities.

The Dow Jones Industrial Average rose 314.71 points, or 1.27 per cent, to 25,189.35, the S&P 500 gained 38.95 points, or 1.45 per cent, to 2,721.58 and the Nasdaq Composite added 175.69 points, or 2.45 per cent, to 7,337.34.

The pan-European STOXX 600 index rose 1.82 per cent.

The dollar index, tracking it against a basket of six major currencies, rose 0.09 per cent, with the euro down 0.22 per cent to $1.1319.

The Chinese currency was on track for a loss of 1.4 per cent in October, its seventh straight monthly decline and its longest losing streak on record.

Gold, set for its best month since January, dipped on the stronger dollar. Spot gold dropped 0.8 per cent to $1,212.64 an ounce.

US gold futures fell 0.92 per cent to $1,214.00 an ounce.

The recovery in global stocks, including gains overnight on Wall Street, pushed Treasury yields higher. Benchmark 10-year notes last fell 13/32 in price to yield 3.1586 per cent, from 3.109 per cent late on Tuesday.

Oil prices recovered as markets braced for the imposition of US sanctions on Iran next week.

US crude fell 0.33 per cent to $65.96 per barrel and Brent was at $75.71, down 0.32 per cent on the day.

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