On 25 February, 2016 – Most global stock indices rallied

Crude oil prices and a positive US durable goods report boosted investor sentiment. 

United States

U.S. stocks moved higher for a second day after markets in Europe rallied. Both ignored a 6.4 percent plunge in the Shanghai Composite overnight. The Dow Jones industrials were up 1.3 percent, the S&P gained 1.1 percent and the Nasdaq added 0.9 percent. Stocks advanced in early afternoon after struggling for direction throughout the morning amid conflicting signals from abroad.

Salesforce.com was up after the company reported strong fourth quarter results and raised its full-year forecast. Investors had been worried about the company’s performance after a competitor, Tableau, issued a dismal outlook this month that caused its shares to drop nearly 50 percent, dragging down its competitors.

U.S. crude oil prices were up and energy stocks in the S&P erased earlier declines after Venezuela’s oil minister said in a televised interview that the country would meet with Russia, Saudi Arabia and Qatar about efforts to stabilize oil markets. The market has rallied recently on hopes of production cuts, only to fall back again when no material change occurs.

In a sign of stabilization in US manufacturing, durable goods orders posted their largest monthly gains since last spring. January durable goods orders were up 4.9 percent on the month. Excluding transportation, orders were up a healthy 1.8 percent. Separate data showed the number of Americans filing applications for unemployment benefits were up last week from a three month low, in part reflecting the typical swings during holiday periods.

These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$14.75 to US$1,236.00. Copper futures were down 0.9 percent to US$2.08. TI spot crude was up 88 US cents to US$33.03. Dated Brent spot crude was up 75 US cents to US$35.16. The US dollar was up against the yen and Swiss franc. The currency declined against the euro, pound and the Canadian and Australian dollars. The Dollar Index was down 0.2 percent. The yield on US Treasury 30 year bond was down 2 basis points to 2.58 percent while the yield on the 10 year note declined 5 basis points to 1.70 percent.

Europe

Stock indices rebounded from two days of losses. Investors managed to shrug off continued concerns over a possible "Brexit," a sharp drop in the Chinese stock market and further weakness in crude oil prices. The FTSE jumped 2.5 percent, the CAC added 2.2 percent, the DAX gained 1.8 percent and the SMI was 1.4 percent higher. A rally in financial stocks provided a boost after Lloyds Banking Group raised its dividend and announced a special dividend. A slight improvement in German consumer sentiment and GDP data from the UK also contributed to the positive mood among investors.

Hochtief climbed after the construction major posted fiscal 2015 profit before tax of €523 million compared to last year's loss of €177 million. Aareal Bank advanced after posting fourth quarter consolidated net income of €60 million, up from last year's €33 million. Deutsche Bank and Commerzbank were higher as were Société Générale, BNP Paribas and Crédit Agricole. In Paris, AXA gained after the insurer reported a 12 percent rise in 2015 net profit, beating estimates. Technip and Total closed higher. Lloyds Banking Group surged after the lender announced a higher dividend for fiscal 2015 along with a special dividend, despite reporting a fall in profit last year. Royal Bank of Scotland, Barclays, HSBC and Standard Chartered gained.

Telecom group BT gained after Ofcom said the company should be overhauled rather than split up, as some rivals had been calling for. British American Tobacco increased after its full year earnings per share came in higher than a year ago. Capita Group declined after it reported fiscal 2015 pre-tax profit of £112.1 million, down from £292.4 million a year ago. Unilever gained in Amsterdam, as the consumer goods giant named Marijn Dekkers, the chief executive of Bayer, as its new chairman. RSA rallied after it posted a 43 percent increase in operating profit to £523 million for 2015.

Final January harmonized index of consumer prices was up 0.3 percent from a year ago after increasing 0.2 percent in December. UK fourth quarter gross domestic product grew 0.5 percent on the quarter and was up 1.9 percent when compared with a year ago.

Asia Pacific

Asian shares were mixed Thursday as oil prices ended a brief overnight rally and Chinese shares slumped on fears of tighter liquidity and the cooling economy ahead of the G20 meeting in Shanghai on Friday and Saturday.

The Shanghai Composite tumbled 6.4 percent — its worst loss in a month — despite the People’s Bank of China intensifying its liquidity operations and the chairman of Industrial and Commercial Bank of China saying there was no basis for continued depreciation of the yuan. The Hang Seng retreated 1.6 percent as the Chinese yuan declined for a fifth day and surging money market rates in China signaled tighter liquidity.

The plunge in stocks underscores the challenge for China’s policy makers as they seek to project an image of stability in the nation’s financial markets as the economy slows. Finance chiefs and central bankers from the Group of 20 meets in Shanghai Friday, while the annual meeting of the legislature begins in Beijing next week. The return of volatility is also a test for China’s new top securities regulator, who took over on the weekend after his predecessor was removed amid criticism of mismanagement.

The Nikkei added 1.4 percent. Sentiment was helped by an overnight bounce in oil prices and a weaker yen. Panasonic, Toshiba, Softbank and Mitsubishi Estate gained. Oil stocks Inpex and JX Holdings advanced. Aeon rallied on a Nikkei report the retail giant is cutting business hours in order to deal with rising costs. Sharp dropped after reports emerged saying it had agreed to a takeover by Taiwan's Foxconn.

The S&P/ASX edged up 0.1 percent while the All Ordinaries was virtually unchanged. Banks including NAB, Westpac and ANZ were up. Miners were mixed with Fortescue Metals Group advancing while BHP Billiton and Rio Tinto retreated. Breville Group jumped after posting higher half-year profit. Online job-search company Seek was up after reporting a 50 percent jump in interim net profit and reaffirming its earnings outlook. The Kospi was up 0.3 percent. The Sensex lost 0.5 percent.

Global Stock Markets

Please remember, the value of investments and the income from them can do down as well as up. Funds that invest in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can be more volatile than other overseas markets. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.

Looking forward*

G20 begins its two day meeting in Shanghai. Japan posts January consumer price index. France releases January consumption of manufactured goods and producer price index. It also releases its second estimate of fourth quarter gross domestic product. The Eurozone posts February business and consumer economic sentiment. In the US, second estimate of fourth quarter GDP, January personal income and spending and international trade in goods will be posted. Final February consumer sentiment will also be reported.

*Note — all releases are listed in local time.