U.S. stocks staged a late rally yesterday and oil regained more than 2% as the market recovered from China uncertainty. Better than expected U.S. durable goods orders were also in focus as traders overlooked China concerns. The positive economic report suggests that the U.S. economy remains productive and that the manufacturing sector is recovering from a soft first half of the year.
The positive sentiment was further supported by comments made by New York Fed President William Dudley who stated that the prospect of a September interest rate hike were less compelling now than it was mere weeks ago. Dudley’s comments caused the US dollar to dip momentarily, however the currency steadied overnight. The Dow Jones Industrial Average surged 619.07 points, or 3.95%, to close Wednesday’s session at 16,285.51. This gain marked the index’s strongest percent-based climb since late 2011. Other benchmarks recovered as well; the NASDAQ Composite added 191.05 points, or 4.24%, to trade at 5697.54 and the S&P 500 500 index gained 72.9 points, or 3.9%, to close the day at 1940.51.
China shares followed Wall Street’s lead, helped by strong policy easing steps taken by the Chinese central bank on Tuesday. MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.8% as it added some distance from the three-year low it hit earlier this week. Chinese shares, which have suffered the strongest declines and volatility, were steadily rising for most of the day despite moving away from session-highs towards the end. The CSI300 index added 0.7% and the Shanghai Composite Index added 4.71% after both indexes tumbled more than 20 percent over the past week.
Crude oil gained 2.15% to trade at $39.43 as it erased overnight losses during Asian trading hours. Oil was supported by the solid gains in Asian markets as well as a reported decline in U.S. oil supplies. Traders flocked to the commodity as it reached six-year lows and helped support rising prices. However, concerns over demand in China have not fully subsided. Additionally, Iran’s reentry to the market is still likely and will result in further worsening of the global supply glut.
Today’s U.S. GDP is the main focus, especially when investors are trying to predict the Federal Reserve’s willingness to raise interest rates this year. After comments made top Fed officials, it is likely that a weak report would push away the prospect of a rate hike. UK GDP will be released on Friday, followed by German inflation data.