Global stocks, oil calm post massive sell-off

Dubai: Calm prevailed in equity and oil markets on Thursday after a massive sell-off since the start of the year. Global equities along with oil recovered in trade on Tuesday as investors turned their focus on valuations even as analysts warned of more volatility.

The Euro Stoxx 50 price index jumped more than 2 per cent to be at 3,090.34, after losing more than 8.6 per cent since the start of the year. Germany’s DAX index was 2.33 per cent higher to be at 10,054.05. Dow Jones futures along with S&P 500 was close to 1 per cent higher.

“Investors are brushing off their primary angst about the revolting start of this year and considering this as a buying opportunity. You cannot castigate them, especially when the central bank in the Eurozone is providing its full abutment and this sentiment is triumphing over in the US,” Naeem Aslam, Chief Market Analyst, Global Head of Analysis at Ava Trade told Gulf News.

“If you have to buy riskier assets, then Europe does represent a good opportunity, because if smart money leaves its footprints in sand, they are this, that one should follow the central bank,” Aslam added.

Positive news flow started from China in the morning when the sell-off abated with the Shanghai stock exchange composite index ending 0.20 per cent higher at 3,022.86. China’s main gauge had shed more than 17 per cent since the start of the year.

Over the last week, concern that turmoil in China’s stocks and currency will spread to the economy and damp global growth has spurred declines in world markets from commodities to stocks, wiping about $5.4 trillion off the value of international equities this year.

Modest recovery

But analysts are seeing light at the end of the tunnel.

“As for global equities, they are somewhere close to fair value, and in the developed world, most especially in Europe, they benefit from ongoing economic growth, so we scope for modest trend upwards in global developed equities this year though they are likely to see repeated bouts of volatility,” Giles Keating, managing director, head of research and deputy chief investment officer at Credit Suisse told Gulf News.

Oil on the other hand was off the morning lows, and last traded in the green.

Brent crude was up 0.51 per cent at $31.71 per barrel, after declining to a low of $30.66. “The debacle move is taking some breather today as it has bounced from its low of $30 but this is nothing more than some traders taking chips off the table before they double down again. We believe that the path of least resistance remains skew towards the downside,” Aslam from AVA Trade added.

Brent crude dropped to a 12- year low this week, declining 15 per cent so far this year. It fell 35 per cent in 2015, a third consecutive annual decline.