Wall Street equities joined a global rally with investors scooping up shares in beaten-down stocks as a choppy month draws to a close.

The S&P 500 and Nasdaq Composite rose around 1.5 per cent each in early dealings in New York. The vigorous gains echoed rises in Europe. The region-wide Stoxx 600 rallied 2.1 per cent, while London’s FTSE 100 climbed 1.8 per cent and the German Dax jumped 3 per cent.

Financials led the way in Europe following a sell-off last week that pushed the Stoxx banking index to the lowest level since at least the late 1990s. Lenders including Deutsche Bank, Commerzbank and BNP Paribas were up at least 3 per cent on Monday. Other sectors that had been under pressure like travel and leisure companies also perked up in Monday’s broad rally.

Market sentiment was bolstered by data that showed profits among China’s industrial companies leapt 19.1 per cent in August from the same month in 2019, the latest sign that the vast economy was rebounding from the effects of coronavirus.

Diageo, the world’s biggest spirits maker, also on Monday struck a confident tone on the US economy. It said its business there had been performing above its expectations, reflecting “resilient consumer demand” and more confidence among some retailers.

Monday’s rise comes at the end of a bumpy month for global markets. The S&P 500 has declined almost 6 per cent since the end of August, while the Stoxx 600 has fallen around 1 per cent.

Sebastien Galy, macro strategist at Nordea, said investors were in “buy on dip mode” and that markets had not “yet reached the bottom”. He said the gains on Monday may have been flattered by fund managers purchasing equities to rebalance their portfolios at the end of the month.

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Fears that markets could take a turn for the worse in the fourth quarter — with potential coronavirus surges and a tumultuous US election — could “become a self-fulfilling prophecy,” said Armin Peter, head of debt capital markets at UBS.

Still, other investors took a more optimistic view. Shamik Dhar, chief economist at BNY Mellon Investment Management, said he expected a return to pre-pandemic levels of economic activity by around the middle of next year. That should be possible if governments could avoid a return to full lockdowns and keep the bulk of their economies going, he said.

American politics is likely to take the spotlight this week, with President Donald Trump’s first election debate with Joe Biden, his Democratic rival for president, scheduled for Tuesday.

In currencies, the pound jumped more than 1 per cent against the dollar and the euro to just under $1.29 and €1.106 respectively. Analysts said they were paying close attention to developments on Brexit talks and any potential new coronavirus restrictions to subdue a surge in the virus.

Stocks in the Asia-Pacific region had an upbeat start to the week, with Hong Kong’s Hang Seng up 1 per cent, Japan’s Topix 1.7 per cent higher and China’s CSI 300 up 0.3 per cent, in an extension of the tech rally that bolstered Wall Street on Friday.

Via Financial Times