China rate cut, European stimulus hints lift markets

Fri Nov 21, 2014 5:00pm EST
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By Michael Connor

NEW YORK (Reuters) - World stock markets and oil prices rallied on Friday, fueled by hopes for global growth after China rolled out a surprise interest rate cut and the European Central Bank indicated it would step up asset purchases to boost the euro zone economy.

The jump in oil prices took beaten-down Brent back above $80 a barrel. U.S. interest rates eased as the dollar gained, and the euro declined.

Wall Street's Dow Jones industrial average and the S&P 500 ended at new record highs, with each rising more than 1 percent on the week in the fifth straight week of gains for U.S. equities.

"This is a one-two punch for global growth," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

The Dow Jones .DJI rose 91.06 points, or 0.5 percent, to close at 17,810.06 on Friday. The S&P 500 .SPX gained 0.52 percent to 2,063.50 and the Nasdaq Composite .IXIC added 0.24 percent to 4,712.97. The Nasdaq rose 0.5 percent for the week.

European shares .FTEU3, oil LCOc1 and other growth-sensitive commodities all leapt on China's move to cut rates to 5.6 percent, following recent data that showed its huge economy was heading for its worst year in almost a quarter of a century.

China's rate reductions were its first in more than two years. They came as ECB head Mario Draghi spoke of his determination to use more aggressive measures, such as large scale asset purchases, to ensure the euro zone does not slump into a new crisis.

Both the euro zone and China have lagged the momentum of the United States, stimulus-driven Japan and faster-growing Britain over the last month, but a ramping up of the ECB's rhetoric and Beijing's actions will stoke hopes of a turnaround.   Continued...

A trader looks at computer screens at Madrid's bourse November 17, 2014. REUTERS/Andrea Comas