Global equities, commodities, oil, and the dollar rallied following assurances from Chinese and European officials that they will take measures to protect markets and achieve their inflation and economic policy goals.
American stocks complimented a global rally in equities. The Dow closed up 1.33 percent at 16,093 on Friday and has gained 4 percent since the bottom on Wednesday. The S&P 500 saw its first weekly gain this year ending 2.03 percent higher at 1,906, after drooping to a 21 month low on Wednesday.
West Texas Intermediate was up 8.67 percent at $32.09. The American standard for crude oil has gained a remarkable 21 percent in two days, its biggest rally in seven years, following Wednesdays close at $26.55, a twelve year low.
European shares enjoyed the biggest two-day rally since 2011. In Japan the Japanese Nikkei 225 soared 5.9 percent and Asian stock rose the most since September.
The Bloomberg Commodity Index stood at 75.2355, 1.96 percent higher on the day and 3.2 percent above Wednesday’s close at 72.8759, the all-time low for this index which goes back to 1991.
The euro was at 1.0795 against the dollar at 4:00 pm, just points from the low of the day and almost a figure and a half beneath yesterday's 1.0922 high. The dollar has added almost two yen from Wednesday’s low of 116.94, trading at 118.80 near the close.
Yields on U.S. 10-year Treasury notes rose as high as 2.08 percent and the 2-year traded above 0.88 percent, its best level in three days.
Markets are speculating that three of the world's central banks will work to counter turmoil in financial markets and remain committed to restoring their inflation and economic growth programs.
European Central Bank President Mario Draghi promised yesterday to brook "no limits” in the bank's efforts to restore inflation and economic growth to the monetary union.
Earlier Chinese Vice President Li Yuanchao said that China will keep intervening in its stock markets to "look after" investors and that Beijing has no intention of further devaluing the yuan. Mr. Draghi had hinted at the press conference following the bank’s decision to keep its main refinancing rate unchanged at 0.05 percent, that the ECB may boost its economic support as soon as its March meeting.
In Davos, Switzerland at the World Economic Forum, President of the Bank of Japan Haruhiko Kuroda said in an interview with Bloomberg News that though "...global financial markets are in kind of a turmoil, but it’s not like a situation immediately after the Lehman crisis.” He repeated previous statements that the bank was ready to do more if needed to insure that inflation reaches the BOJ's 2 percent goal. Receding inflation expectations in Japan and a yen that has gained 4 percent versus the dollar in the past month have increased pressure on the Bank of Japan to enlarge its stimulus measures at its meeting next week.
Markets have been pummeled this year by fears of a worldwide decline in economic growth and spreading deflation emanating from China. The concern is that China will be unable to manage its transition away from manufacturing and exports to a service economy and that the devaluation of the yuan engineered by the Beijing government is a sign that the economic situation on the mainland is worse than portrayed by government statistics or admitted by Chinese officials.
Since the start of the year global equities have lost $7.8 trillion in value as the slowdown in China and the collapse in oil and commodity prices have stoked investors and traders fears that the world economy is headed for a serious downturn or recession.
Chief Market Strategist
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