LONDON, Oct 29 — World stocks recovered from three-week lows today after US gross domestic product data showed the world’s biggest economy emerged from recession in the third quarter at a slightly faster pace than expected.
The data, showing annualised growth of 3.5 per cent in Q3 compared with a forecast for 3.3 per cent, reassured investors who had feared this year’s recovery may run out of steam and yet the pace of growth is unlikely to be enough to prompt tighter monetary and fiscal policy yet, traders said.
“This really is extremely encouraging, and better than what most optimists had expected this morning,” said Peter Kenny, managing director of Knight Equity Markets in Jersey City.
The MSCI world index turned positive after the data, having rebounded from three-week lows set following yesterday’s biggest one-day selloff since August.
Wall Street equity futures pointed to a higher open there later. US 10-year Treasury yields jumped six basis points. The dollar , which has suffered during the recovery due to a greater appetite for riskier overseas investments, fell back.
In Europe, the FTSEurofirst 300 index jumped 1.17 per cent, having fallen around 0.2 per cent earlier.
Emerging stocks, which had suffered heavily from this week’s global markets shakeout and retreat from risk, halved their early losses to stand down 0.7 per cent
US crude oil was up 1.6 per cent at US$78.63 (RM275.21) a barrel.
Despite the initial market reactions, many analysts remained cautious.
“Suggestions that this figure mark the end of the recession in the US, although technically correct, ignore the relatively low quality of the growth registered in this release,” said Rob Carnell, economist at ING. “Such suggestions also ignore the likely soft fourth quarter that is now in the pipeline. The US economy is not out of the woods yet.”
Earlier, world stocks fell to three-week lows, following a sharp fall on Wall Street, as disappointing European corporate results fanned concerns about the durability of the rebound.
One of the biggest losers was oil major Royal Dutch Shell which fell more than 3 per cent after its third quarter net profits fell 73 per cent and Chief Executive Peter Voser warned of a slow recovery.
Markets are worried that the rally in world stocks — the benchmark MSCI world equity index was up as much as 75 per cent this month from March — has been overdone. — Reuters
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