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(New throughout, updates prices, market activity and comments
to close of U.S. markets)
* Stocks surge after biggest daily loss since October
* Gold prices fall, yen weakens as safe-haven appeal slips
* Yield curve reinverts in potential recession warning
* Safe-haven demand strong after risk assets sell off
* Oil prices rise after five-day decline
By Herbert Lash
NEW YORK, Jan 28 (Reuters) - Global equity markets rebounded
in a broad rally on Tuesday and some safe-haven assets eased as
investors took a less pessimistic view of the potential economic
fallout from China's coronavirus outbreak.
Gold fell and the Japanese yen dipped against the dollar,
but risk aversion in currency markets persisted, with the
Australian dollar AUD= leading losers and the greenback
strengthening to an eight-week high against a basket of six
rivals .DXY .
In a possible warning of a future weak economy, strong gains
in U.S. Treasuries this week led key parts of the U.S. yield
curve to reinvert, a trend that in the past has indicated that a
recession in the United States will follow in a year or two.
Gains in technology and financial shares helped Wall Street
recoup some losses from Monday's selloff, which was sparked by
worries about the possible economic impact of the coronavirus
outbreak.
Major European and U.S. stock indexes rebounded around 1% as
President Xi Jinping said China was sure of defeating a "devil"
coronavirus that has killed 106 people.
The World Health Organization's director-general said he is
confident China can control the spread of the coronavirus, the
Chinese Foreign Ministry said. Chinese markets will remain closed until next week, but a
0.5% overnight drop in Tokyo's Nikkei was more modest than
Monday's thumping. Other Asian markets that were open rallied.
"History shows us as we look back at several different
examples that these viral outbreaks tend to be short lived,"
said Candice Bangsund, a global asset allocation portfolio
manager at Fiera Capital in Montreal.
While markets should gyrate for awhile, the global economy
will resume the improving growth it started to exhibit late last
year, Bangsund said.
"The economy could be ripe for a sharp snapback or a
V-shaped recovery once we find out when this is contained and
when the outbreak is indeed brought under control," she said.
"We maintain the global economy will come back to life."
MSCI's gauge of stocks across the globe .MIWD00000PUS
gained 0.65%, while its emerging market index lost 0.05%.
Shares on Wall Street also surged. The Dow Jones Industrial
Average .DJI rose 187.05 points, or 0.66%, to 28,722.85. The
S&P 500 .SPX gained 32.61 points, or 1.01%, to 3,276.24 and
the Nasdaq Composite .IXIC added 130.37 points, or 1.43%, to
9,269.68.
Oil futures edged up after falling for five days, following
the recovery in equities and talk that Organization of the
Petroleum Exporting Countries and its allies might tighten the
market amid fears the coronavirus could weigh on oil demand.
Brent LCOc1 futures settled up 19 cents at $59.51 a
barrel, while U.S. West Texas Intermediate (WTI) crude CLc1
settled up 34 cents at $53.48. O/R
The yield on the benchmark 10-year U.S. Treasury note
bounced off three-month lows after a key part of the yield curve
briefly inverted for the first time since October.
The yield US10YT=RR fell as low as 1.57% overnight, the
lowest since Oct. 10, before the 10-year note pared some losses
to fall 13/32 in price and lift its yield to 1.6493%.
An inverted curve, when longer-dated yields fall below
shorter-maturity ones, has often been a percussor of a U.S.
recession.
Euro zone government bond yields bounced off three-month
lows to rise for the first time in over a week after U.S.
consumer confidence exceeded expectations to hit its highest
level since August Traders awaited the outcome of a two-day meeting of Federal
Reserve policymakers, which started on Tuesday. The market
consensus is that the central bank will keep interest rates
unchanged at between 1.5% and 1.75%.
The dollar index .DXY rose 0.02%, with the euro EUR= up
0.03% to $1.1019. The yen JPY= weakened 0.24% versus the
greenback at 109.15 per dollar.
U.S. gold futures GCcv1 settled down 0.5% at $1,569.8 an
ounce.
Asia stock markets https://tmsnrt.rs/2zpUAr4
Asia-Pacific valuations https://tmsnrt.rs/2Dr2BQA
World stocks lose $834 billion in market value https://tmsnrt.rs/2O6MWZx
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