LONDON: World stocks bounced off a near two-year low on Thursday, lifted by a dramatic Wall Street surge, though a fall in Chinese industrial profits and renewed Italian banking worries offered a sobering reminder of the problems weighing on the world economy.
The Dow Jones Industrial Average surged more than 1,000 points for the first time on Wednesday, leading a broad Wall Street rebound, after a report that holiday sales were the strongest in years helped mollify concerns about the health of the economy.
Stocks in Asia and Europe took their cue from this rally, and opened strongly, pushing the MSCI world equity index, which tracks shares in 47 countries, 0.4 percent higher. The index had already spiked 2.3 percent in the previous session, rising off a 22-month low hit on Christmas Eve.
"The relentless selling which prevailed leading up to Christmas has mercifully halted as U.S. stock markets recorded significant gains," said Stephen Innes, a trader at online FX broker OANDA.
He attributed the rally partly to a Mastercard Inc report that sales during the U.S. holiday shopping season rose the most in six years in 2018, helping allay concerns about the health of the U.S. economy.
"The surge in online purchases over the holiday season should be a reminder for the markets never to underestimate the purchasing power of the U.S. consumer," Innes said.
There were also some attempts by the White House to temper its broadside against the Federal Reserve. Kevin Hassett, chairman of the White House Council of Economic Advisers, said on Wednesday that Fed Chairman Jerome Powell's job was not in jeopardy.
However, the rally fizzled somewhat in Europe where shares opened higher 0.5 percent, then erased most of the early gains. France's CAC index and Spain's Ibex stood 0.3 percent higher while a pan-European stock index was flat, dragged lower by Italian stocks.
Milan was hit by renewed concerns over the country's banking sector after lender Banca Carige was denied a cash call by its largest shareholder.
The news weighed on Italian government bonds too, curbing a month-long rally and pushing 10-year yields higher on the day.
Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.6 percent and away from eight-week lows while Japan's Nikkei managed to pull out of bear market territory, to closing 3.9 percent higher.
Australian shares jumped 1.9 percent.
But Chinese shares did not join the rebound, with mainland shares as well as Hong Kong down 0.4 percent. Earnings at China's industrial firms dropped in November for the first time in nearly three years
OIL IS NOT WELL
The concerns over a faltering global economy and signs of a crude oil glut pressured oil prices, sending Brent futures 2.4 percent lower to US$53.26 a barrel and partly reversing the previous day's 8 percent jump.
Wednesday's rise was triggered by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, agreeing to limit output by 1.2 million barrels per day (bpd) starting in January.
U.S. Treasury yields too reversed direction after rising sharply on Wednesday, and dropped three basis points to 2.765 percent.
Another safe-haven, gold, was up 0.4 percent, remaining just below a six-month peak hit earlier this week.
The dollar gave up some of its overnight gains, but losses were limited to around 0.3 percent against a basket of currencies. Against the yen, a perceived safe haven, it was off 0.5 percent at 110.82 yen.
It had risen nearly 1 percent overnight, booking its largest single-day gain against the yen since late April.
(Reporting by Abhinav Ramnarayan; Editing by Toby Chopra)