Global stock markets soar on 'bad news is good news' as commodities leap after weak US jobs report slays US rate hike call

A strong performance by heavyweight commodity stocks helped the Footsie post gains of over 2 per cent today as global stocks markets bounded higher on reduced expectations for a US rate hike following Friday’s weak jobs report

In mid afternoon trading, the FTSE 100 index was 137.2 points, or 2.2 per cent higher at 6,267.2, while in Europe, France's CAC 40 index jumped 3.5 per cent, and Germany's Dax 30 index gained 2.9 per cent.

European markets were boosted by gains today in Asia after a strong pre-weekend rally by US stocks as traders finally make up their mind over how to interpret Friday’s US jobs data.

Strong rally: As it bounced another 2% higher today, the FTSE 100 index extended its gains over the four sessions since posting big falls at the start of last week to more than 6%

Strong rally: As it bounced another 2% higher today, the FTSE 100 index extended its gains over the four sessions since posting big falls at the start of last week to more than 6%

Naeem Aslam, market analyst at AvaTrade said ‘bad news is turning out to be a good news for the equity market and it has taken away one element of the uncertainty, which is that the Fed will not rush now to raise the interest rate.

‘Therefore, investors do not have to worry about the two biggest central banks, which matters the most and that they are running in two opposite directions.

‘Most odds are stacked in favor of the Fed raising the interest rate in March next year. If that is certainly the case, we could see investors getting in a position to beef up their portfolio and try to make the most of the upcoming rally.’

Shares in New York carried over the good showings in early trade today. The blue chip Dow Jones Industrial Average added 166.6 points, or 1 per cent, to 16,638.9, while the broader S&P 500 index gained 20.2 points, or 1.1 per cent at 1,971.5, and the tech-laden Nasdaq Composite was up 35.2 points to 4,743.0.

Jonathan Sudaria, dealer at London Capital Group said: ‘The (jobs) low report which also showed a stall in U.S hourly wage growth has sparked rumours that the Fed will have to delay hiking rates into 2016 as the US economy is clearly not robust enough to warrant an increase in interest rates.’

He added: ‘Economic data around the globe is coming in disappointing; with what started in China now rippling out across everyone’s shores. In light of this slowdown, expectations are that central banks will err on the dovish side’.

With an increase in US interest rates looking now unlikely for this year, the dollar dropped sharply on Friday, although it was steadier in afternoon trading today – almost flat at $.15167 versus the pound, and at $1.1213 against the euro.

The weak showing by the US currency, however, was a boon for commodity prices, in which they are priced, with the cost of metals and oils bouncing back after recent falls.

As a result, heavyweight miners led the UK blue chips higher, with the likes of Anglo American gaining 16.1p to 569.7p, and Rio Tinto adding 57.5p at 2,299.5p.

But it was under-pressure commodities trader and miner Glencore which topped the FTSE 100 index, jumping by more than 12 per cent, or 11.8p to 107p, after a surge by its shares overnight in Hong Kong sparked by trader talk that the business might be put up for sale.

The advance by Glencore’s shares finally saw it recoup all of last Monday’s near 30 per cent plunge made on debt concerns and after a negative broker note, even though the firm said ‘it is not aware of any reasons for these price and volume movements.’

The Anglo-Swiss firm, which has lost around two-thirds of its value this year, recently pledged to investors to make disposals and cut its $30billion (£20billion) debt mountain by a third.

The oil sector was also on the rise, boosted by a gain of just over 1 per cent for Brent Crude to just under $49 a barrel. BP took on 3.5 per cent, or 12.1p to 363.4p, while Royal Dutch Shell was 3.7 per cent higher, up 60p to 1,682p.

Crude prices found gains after Russia said it was prepared to meet with producers to discuss the situation of the global oil market, while a report also showing a fifth weekly decline in the US oil rig count helped fuel the rally.

Jameel Ahmad, FXTM Chief Market Analyst at FXTM said: ‘There does seem to be an improved sentiment when it comes to the global markets as we enter the final quarter of the year, which is a substantial contrast when you take into account the excessive downside pressures which they were facing at the end of the previous quarter.’

But, he added: ‘I do however remain unconvinced that this is the beginning of a run of positive form when it comes to the global markets and there are still risks to investor sentiment out there.’

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