Shares up as Fed edges away from September rate hike

Stocks rallied on Thursday (August 27th) as risk appetite returned to the markets, lifting crude oil and the US dollar.

Shares on Wall Street had notched up their biggest gain in four years overnight after a Federal Reserve policymaker said the chances of the bank lifting rates in September had diminished following two weeks of market turmoil.

The FTSE 100 in London rose 2.2 per cent to 6,114, while the CAC in Paris was up more than three per cent at 4,637. In Frankfurt, the DAX advanced three per cent to trade at 10,300.

Companies with large exposure to China, including miner Anglo American, bank Standard Chartered and chipmaker ARM, were among the biggest gainers on the FTSE.

Earlier, the Shanghai Composite Index rallied by five per cent to end a dreadful run of losses, sending Asian markets broadly higher. The Nikkei in Tokyo finished trading up 1.1 per cent at 18,574.44, while the Hang Seng in Hong Kong surged by 3.6 per cent to 21,838.54.

In the previous session on Wednesday in the US, the Dow Jones Industrial Average surged by 619 points, its third-largest daily point gain in history. The Dow closed up nearly four per cent at 16,285.51, while the S&P 500 added 3.9 per cent to finish at 1,940.51.

Wall Street was lifted after New York Fed boss William Dudley said the case for hiking rates in September was “less compelling” in the wake of recent market events.

The rally in stocks boosted demand for commodities, with oil and copper seeing large price gains.

US light crude for October delivery rose more than four per cent on the New York Mercantile Exchange to reclaim the $40 a barrel handle. Brent crude, the global benchmark, also climbed by four per cent to reach $45 a barrel.

Copper for September delivery rose by more than two per cent as the more upbeat mood in Shanghai lifted demand for the metal.

On the currency markets, the dollar inched up to a four-day high against its major peers ahead of the release of second quarter growth figures for the US later.

USD/JPY was up 0.3 per cent at 120.31, while EUR/USD edged lower to 1.1286, nearly four cents off a multi-month peak hit during Monday’s selloff.