US and European stocks rallied strongly on Friday, ending a painful week on a positive note following solid US and German economic data and a surge in oil prices.
Markets in London jumped 3.1 percent and those in Frankfurt and Paris gained 2.5 percent, brushing off another slump in Asia. US stocks followed up, with the Dow Jones Industrial Average climbing 2 percent behind big gains in banking and energy equities.
Investors welcomed the advance as a respite from the grim trade thus far this year that resulted in a particularly bruising session on Thursday prompted by rising worries about the global economy. Analysts were not sure what to make of Friday’s gains.
Photo: Bloomberg
“It is a counter-trend rally, a bear market rally, if you believe we’re at the beginning of a bear market,” said Sam Stovall, chief investment officer at S&P Capital IQ. “It’s a little too early to say that everything is behind us and now we’re back to the races.”
“It’s hard to read too much into it,” said Mace Blicksilver, director of Marblehead Asset Management, who said he was troubled that big US growth stocks like Facebook Inc and Google parent Alphabet Inc did not post large gains.
Key factors behind Friday’s rise included data that showed the German economy grew by a solid 0.3 percent in the fourth quarter of last year, and a 0.2 percent rise in US retail sales last month.
Investors were also cheered by a 12.3 percent rise in US oil prices to US$29.44 per barrel on speculation that the OPEC could organize talks with other producers to cut output.
Banking stocks were especially sky-bound, with Deutsche Bank soaring 11.8 percent after announcing it would repurchase up to 4.8 billion euros (US$5.4 billion) of its own bonds, a show of financial force meant to assuage concerns over its strength.
That was accompanied by news that JPMorgan Chase & Co chief executive Jamie Dimon spent US$26 million of his own money to purchase JPMorgan shares, which helped lift JPMorgan shares 8.3 percent.
Other banks also powered up, with Barclays PLC jumping 6.3 percent, BNP Paribas SA 5.9 percent and Bank of America Corp 7.1 percent.
For all the strength in Europe and the US, Asian stocks endured another bruising session, with Japan’s Nikkei index tumbling another 4.8 percent on Friday, taking its total loss this week to more than 11 percent.
The latest retreat came after the yen, viewed as a safe-haven investment, hit 16-month-plus highs against the US dollar. The yen retreated later on Friday.
The currency’s rise led Tokyo to say it would take “appropriate” measures, fueling speculation officials were considering a currency market intervention.
Friday’s gains also did little to make up for losses so far this year. Shares in Milan has lost about 23 percent of its value, Frankfurt more then 16 percent, Paris about 14 percent and London more than 8 percent.
Investors remain perturbed by a range of concerns, including slowing growth in China, the US Federal Reserve’s plan to lift interest rates, the commodity bust and the stability of the banking sector in a world of low or negative interest rates.
“The fear of a global recession is very real,” said Craig Erlam, senior market analyst at Oanda trading group.
“It does feel like a culmination of factors that have built up over the last seven years are finally coming together to test just how far the global economy has come and how strong the recovery truly is,” he said.
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