NEW YORK Global equity markets on Tuesday snapped back from a rout at the start of the year after data showing weak economic growth in China prompted speculation Beijing would boost stimulus efforts, but a renewed drop in U.S. oil prices raised a cautionary flag.
Stock markets from Asia to Europe and on Wall Street jumped on Chinese gross domestic product data that showed the slowest growth last year in a quarter century.
Shares in Europe rose more than 1 percent, while MSCI's broadest index of Asia-Pacific shares outside Japan gained 1.6 percent.
The elation expressed in equity markets struck Simon Smith, chief economist at online brokerage FxPro, as odd, as the weak GDP data are strange reasons to cheer China. Stimulus can only mean more interest rate cuts or reduced reserve requirements, which would weaken the Chinese currency further.
"Most of the time developed markets have been happy to ignore and be totally uncorrelated to the China markets," he said.
The Dow and S&P 500 posted modest gains, while the Nasdaq traded near break-even with U.S. crude prices sliding under $29 a barrel. The International Energy Agency, which advises developed countries on energy policy, said the market should remain oversupplied this year and weaker prices could lie ahead.
The possibility that oil may tumble further has reminded investors of the financial crisis in 2008 when many financial stocks cratered and their prices never recovered to former levels, Rick Meckler, president of hedge fund LibertyView Capital Management LLC in Jersey City, New Jersey.
"I wouldn't be surprised if the markets end up today," said Meckler, who added that people are afraid that oil may collapse.
"You're just having this testing of what the bottom on energy is and no one knows the impact of a complete collapse the energy industry would have on U.S. equity prices," he said.
MSCI's all-country world stock index rose 0.8 percent, while the pan-European FTSEurofirst 300 index rose to close 1.37 percent higher at 1,310.95.
On Wall Street, the Dow Jones industrial average is rose 59.44 points, or 0.37 percent, to 16,047.52. The S&P 500 gained 4.69 points, or 0.25 percent, to 1,885.02 and the Nasdaq Composite added 0.59 points, or 0.01 percent, to 4,489.01.
Global benchmark Brent crude futures rose, while the U.S. futures contract slid, though the price of both remained within 30 cents of each other. The U.S. contract did not settle on Monday, a public holiday in the U.S. market.
Brent crude futures traded up 2.8 percent at $29.34 a barrel. U.S. crude futures fell 1 percent at $29.14. Earlier they had touched an intra-day high of $30.21.
Investor risk appetite improved on the expectation of further stimulus in China and rising Brent crude prices. Chinese oil demand likely hit a record in 2015, helping bolster the global oil benchmark.
The dollar index, which measures the greenback against six major trading currencies, slid 0.02 percent. The dollar added 0.10 percent against the Japanese currency, moving to 117.43 yen.
Against the euro, the dollar slipped 0.32 percent to $1.0925.
The benchmark U.S. Treasury note fell slightly to lift its yield to 2.0347 percent.
Top-rated German bond yields rose as investors favoured riskier assets. The price of 10-year German bonds, viewed as a safe-haven in times of market turmoil, fell and its yield rose 1.5 basis points to 0.485 percent, off the day's high just above 0.50 percent.
U.S. gold for February delivery fell 0.14 percent to $1,089.20 an ounce.
(Reporting by Herbert Lash; Editing by James Dalgleish and Nick Zieminski)
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Updated Date: Jan 20, 2016 00:45 AM