A huge about turn on Wall Street that generated the strongest rally in US stocks since 2011 has lifted spirits across global markets. It has been central banks to the rescue, with PBOC intervention and both the Fed and ECB putting in their two cents.
On Wednesday Fed voting member William Dudley poured cold water on a September rate hike in the US and the ECB’s Praet hinted at more QE in Europe if needed. On Thursday the PBOC are reported to have directly intervened in equity and swap markets which helped the Shanghai Composite turn a daily loss into a 5.3% gain.
The direction of travel has changed but one thing that hasn’t is the volatility. Inevitably the volatility will die down but before it does, markets are likely to remain twitchy and overly sensitive to the latest developments in China, commodities and central banks.
UK and European markets recovered this week’s losses after rallying on Thursday morning while futures point to another strong open for US stocks ahead of the latest revision to second quarter growth figures.
A strong finish for US and Chinese stock markets alongside firmer commodity prices are bolstering the FTSE 100
to its highest this week. The basic resource sector including the likes of Anglo American and BP led the advance with Barclays also a top riser after a US court dismissed a case brought against its dark pool.
Second quarter growth in the US is expected to be revised higher today to 3.2% from 2.3% with personal consumption also expected to tick higher to 3.1% from 2.9%.
Good news was good for stocks yesterday when a positive surprise in durable goods orders extended opening gains in the Dow Jones and S&P 500. The market reaction to stronger growth will be telling for the sustainability of the market rebound. Strong US growth helps offset concerns over slower growth in China but also means a rate hike could come sooner.
US retailers Dollar General, Tiffany & Co and GameStop as well as gun-maker Smith and Wesson report earnings on Thursday.
Futures suggest the:
will open 22 points higher at 1,962 with the
expected to open 185 points higher at 16,470 and the
56 points higher at 4,275.
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