Global stock markets shot up yesterday, eating into recent losses and giving investors hope of a traditional end-of-year Santa Rally.
Shares across Europe soared to their biggest one-day gain in over three years, while across the pond the S&P also recorded its biggest two-day advance since November 2011.
“We’re now well set up for the self-fulfilling prophecy of the end-of-year rally,” said Central Markets trading analyst Joe Neighbour.
David Buik of Panmure Gordon added: “I think you might get a FTSE Santa rally up to 6,500 or 6,600 by the end of the year.”
Equities were driven up partly by the US Federal Reserve, which issued an upbeat report on the state of the American economy on Wednesday night. The Fed also assured investors that it would take a “patient” approach to tightening monetary policy in 2015.
“That easy money trade came to the forefront, and it’s so powerful it wipes out all of these concerns that exist,” said Adam Sarhan of Sarhan Capital in New York. Worries over a currency crisis in Russia, economic woes in the Eurozone, and a slowdown in emerging markets had been weighing on sentiment recently.
But yesterday even the benchmark index in Athens gained 3.22 per cent. The leader of Syriza – the left-wing Greek opposition party that some analysts fear could come to power – yesterday said it is committed to keeping Greece in the single currency bloc, easing fears that the party would aim to leave the Eurozone.
Meanwhile the French Cac 40 jumped 3.35 per cent while the German Dax closed 2.32 per cent higher. In London, the FTSE closed at 6,466, a gain of two per cent. The FTSEurofirst 300 index of the top European shares climbed 2.8 per cent reaching 1,353.52 points – its biggest gain since November 2011. And in the US, the Dow Jones and S&P 500 both closed up 2.4 per cent, at 17,778.15 and 2,061.23 respectively.
“To see the Dow up 500 points in two days, and the FTSE up 270 points in two days, makes no logical sense to me whatsoever,” said Buik. “It happens for the simple reason that the level of activity is so low that it doesn’t take much interest for market makers to move their price.”
Some analysts remain cautious. ”A move higher could be the opportunity investors are waiting for to sell,” added Joshua Raymond at City Index.