Stocks in Europe and Asia rose cautiously on Friday after Wall Street ended a volatile session with big gains.
But fears of further price swings and worries about U.S. politics kept safe-haven currencies such as the yen and Swiss franc in demand.
European shares opened in positive territory after Thursday’s 1.7 per cent retreat and were up about 1.4 per cent at 0920 GMT, with most bourses and sectors in the black.
They have not matched a two-day surge on U.S. indexes that saw the benchmark S&P 500 index gain 5.9 per cent, its best performance since late August 2015 when the market was in the midst of a downturn over a slowing Chinese economy.
Asian stock markets also posted modest gains, with MSCI’s broadest index of Asia-Pacific shares outside Japan rising 0.8 per cent.
While Wall Street’s capacity to shake off an initial selloff and post one of its highest daily percentage increases has fueled hope that some of the selling pressure is easing, investors in Europe remained wary.
“The volatility here at year-end is unlikely to be sustained, but without more encouraging signals from Washington, the markets will likely remain treacherous in the New Year,” Marc Chandler at Bannockburn securities told clients.
Volatility in Europe and in the United States has spiked to highs not seen since the sharp global correction in stock markets in February.
The yearly picture for world stocks remains grim, with the MSCI world equity index, which tracks shares in 47 countries, losing close to 12 per cent so far in 2018.
While stocks showed signs they might recoup more losses in the year’s final days, lingering doubts about the stability of the market sustained demand for safe-haven currencies.
“Markets are a bit more cautious on risk appetite, with the Japanese yen and the Swiss franc gaining.
“The dollar continues to be soft across the board as volatile stock markets are reducing the relative safe haven appeal for U.S. assets,” said Lee Hardman, an FX strategist at MUFG in London.
The dollar extended overnight losses and was down 0.55 per cent at 110.40 yen and was on track to lose more than 2 per cent this month.
Against the Swiss franc, it declined 0.3 per cent to 0.9853 francs per dollar after slumping more than 0.8 per cent the previous day.
Oil prices rebounded and took back some of the ground lost this week, but remained close to their lowest levels in more than a year as rising U.S. inventories and concern over global economic growth kept markets under pressure.
Brent crude oil was up 1.10 dollars, or 2.1 per cent, at 53.26 dollars a barrel by 0906 GMT, having earlier risen more than 3 per cent. It had dropped 4.2 per cent on Thursday.
Spot gold, which has benefited this week from the global market turmoil, was just slightly higher at 1,276.33 dollars an ounce following an ascent to a six-month high of 1,279.06 dollars on Wednesday.
In fixed income, Italian yields rose as investors made space for the last auction of the year.
A strong auction of zero coupon bonds on Thursday led to a mini-rally in Italian government debt as investors saw this is a good omen for today’s up to 5 billion euro bond sale, which caps one of the largest borrowing programmes.
The Treasury is hoping the auction will decisively show that Italy has turned a corner after months of volatile trading on the back of fractious talks between Rome and Brussels over its spending plans.
Similarly, emerging market stocks posted strong gains on Friday as investor sentiment was boosted by Wall Street’s late rebound in the previous session that helped it sustain Wednesday’s dramatic rally.
But analysts said risks of a slide remained.
The MSCI index of emerging markets shares was 0.8 per cent higher with India and Taiwan stocks leading gains in Asia, up nearly 1 per cent each, while Chinese stocks recovered from previous session’s losses.
Stocks in China rose after authorities allowed banks to set up new wealth management firms, which combined with looser monetary policy.
This implied Chinese stock investors “will no longer have to worry about liquidity” in 2019, Wei Yi, an analyst at Kaiyuan Securities said in a note.
An over 1 per cent rise in Russian stocks and South African shares, added to the broader index’s gains.
U.S. stocks ended higher on Thursday following steep losses for much of the session, a day after markets globally were supported by the major U.S. indexes posting their biggest daily percentage increases in nearly a decade.
“Pronouncements of bear market averted by emphatic post-Christmas Wall Street rally.
“But that is at best a distraction, more likely year-end distortion amid thinner liquidity accentuated by short-covering into New Year holidays,” said Vishnu Varathan, head of economics & strategy at Mizuho Bank in a note.
“Rather than prematurely rejoicing over a dead bear (and return to a bull market), it may be far more sensible to worry about a dead cat (bounce) that could quickly fizzle and revert to a more prolonged price correction,” he said.
Currencies of developing market economies firmed against a weaker dollar with most Asian currencies in the black, and Turkey’s lira and South Africa’s rand each touching a one-week high.
The MSCI index of emerging market currencies hit its highest in three weeks, up 0.3 per cent.
Lingering concerns about slowing global growth after weak data from the United States and China, as well as renewed trade tensions between the two countries pressured the greenback.
Most east European currencies made marginal moves against a stronger euro.