By D. Maan, Jadetimes News
Global Stock Markets Rise on Reduced Fears of US Recession
The FTSE 100 rose yesterday in modest fashion ahead of reduced fears over the health of the US economy. Yesterday's upward move continued the trend already seen across financial markets around the globe since US stocks fared similarly well earlier this week.
The FTSE 100, a broad indicator of major UK businesses banks, airlines, property companies, and others climbed 0.7% in early trading. It comes after a strong rally yesterday in US markets where the benchmark S&P 500 climbed 2.3%, the Dow Jones Industrial Average gained 1.8%, and the Nasdaq Composite surged 2.9%. That was the best trading day in almost two years for US stock markets.
Global markets had suffered lately from financial jitters, which were partly driven by fears that the US economy could be on the verge of a slowdown. Official figures on Thursday did slightly ease those concerns by revealing US unemployment claims rose less than expected. Published by the US Labor Department, the latest figures released revealed that first-time unemployment claims fell to 233,000 less than market expectations.
The trends resonated into the European markets, where stock indices rose similar to their US peers. Key bourses in Paris and Frankfurt continued scaling upwards in tandem with some of the world's main markets in recovery. In Asia, share prices edged forward as markets recovered some of their sharp losses earlier this week. Japan had its worst day since 1987 and was rebounding.
UBS Global Wealth Management reacted to the outcome: "While US jobless claims are not typically a key market event, today's figures reinforce our view that pessimism on the US economy recently has been overstated." It's this view that contributed to a general sense of relief and optimism among investors.
Analysts say trading conditions are likely to stay very volatile in the near term despite the positive momentum in global markets. Peter McGuire, a representative of trading platform XM.com, said that the current market volatility presents both challenges and opportunities for investors. He added that market conditions would likely be choppy, especially with the impending US election season and expected Federal Reserve decisions.
The latest decision of the Federal Reserve to hold, rather than lower, interest rates further complicates the market landscape. Other major central banks are undertaking very aggressive monetary stances; for example, that of the Bank of England. The market response to these actions has engendered a good deal of speculation about when and how far the Fed will have to cut rates.
Jun Bei Liu, the portfolio manager at Tribeca Investment Partners, pondered on whether the Federal Reserve would lower rates by as much as 50 basis points in September, probably setting the scene for more market expansion and valuation. The extent these decisions had on market dynamics remained very uncertain as investors get through this period of economic unpredictability.
While global equity markets are rebounding due to fading fears of recession, investors have to be ready for further volatility. The interplay between policy set by central banks, data, and politics is likely to keep market conditions fluid across the year ahead.
