Risk appetite made a comeback following the selloff on Monday that erased $2.7 trillion from the value of global equities. Stocks, commodities and emerging-market currencies extended gains after China cut interest rates.
Standard & Poor’s 500 Index futures rose 3.9 percent. A gauge of options prices on U.S. equities surged as much as 90 percent Monday to touch the highest level since January 2009. The Chicago Board Options Exchange Volatility Index, or VIX, finished the day at 40.74, the highest close since October 2011.
European shares clawed back some losses following their biggest decline since the 2008 financial crisis and futures signaled U.S. equities will rally after entering a correction.
Russia’s ruble led a rebound in developing-nation currencies as raw-material prices advanced from the lowest level since 1999. Chinese stock-index futures surged. The yen fell for the first time in five days and Treasuries retreated.
The recovery signaled the selloff may be overdone. German business confidence unexpectedly increased in August as companies brushed off concerns that China’s slowing economy will drag on global growth. China’s central bank cut its benchmark lending rate for the fifth time since November and lowered the amount of cash banks must set aside.
China’s move “is encouraging in the sense that they’re trying to mitigate the impact of the decline,” said Peter Dixon, a global economist at Commerzbank AG in London. “Investors panicked yesterday, concerned about of the lack of reaction and this might help them today. Markets are beginning to realize this is a Chinese problem not a European one.”
The Stoxx Europe 600 Index jumped 4.4 percent at 7:40 a.m. in New York. German equities rallied after entering a bear market, and the U.K.’s FTSE 100 Index climbed from lowest level since 2012.
Syngenta AG jumped 9.1 percent as people familiar with the situation said Monsanto Co. has made an increased takeover offer for the Swiss pesticide producer. RSA Insurance Group Plc climbed 4.6 percent after Zurich Insurance Group AG proposed to buy it. BHP Billiton Ltd. rallied 7 percent after the world’s biggest mining company said it will raise its dividend.
“Fundamentals aren’t as bad as the headlines would suggest,” said David McDonald, Sydney-based chief investment strategist for Australia at Credit Suisse Group AG’s wealth management and private banking unit. “It’s just a case of whether you would want to rush in now or perhaps wait until it settles down a bit more.”
The MSCI Emerging Markets Index climbed 2.3 percent after closing Monday at the lowest since July 2009, with benchmarks from Taiwan to Malaysia and Hungary advance more than 2 percent. The ruble strengthened 1.7 percent and South Africa’s rand climbed 1.4 percent.
Half of the 30 largest equity markets in developing economies have fallen 20 percent or more from their peaks, surpassing the threshold for a bear market. China and Russia have led the pack, tumbling more than 30 percent each. The remainder are either in a correction, or on the brink of one.
Mark Mobius says investors should hold off from buying developing-nation shares as the rebound will be shortlived amid widening price swings.
“We have a little bit to go before we see stabilization, but volatility will remain,” Mobius, chairman of the emerging markets group at Franklin Templeton Investments, said in an interview with Bloomberg Television. “We are sitting on cash.”
The FTSE China A50 stocks-index futures jumped 5.5 percent. Earlier, the Shanghai Composite Index dropped 7.6 percent, falling below 3,000 for the first time in eight months.
The one-year lending rate will drop by 25 basis points to 4.6 percent effective Wednesday, the People’s Bank of China said. The one-year deposit rate will fall by 25 basis points to 1.75 percent.
The Bloomberg Commodity Index rose 1.4 percent. West Texas Intermediate crude gained 3.4 percent to $39.53 a barrel and Brent futures advanced 3.6 percent to $44.23. The oil market is healthier than Monday’s drop to six-year lows suggests, according to banks including Morgan Stanley and Standard Chartered Plc. Copper climbed 1.5 percent in London.
Corn rose 1 percent to $3.8425 a bushel on forecasts of warm, dry weather in that could increase stress on crops from Missouri to Ohio.
Gold fell 0.5 percent to $1,148.39 an ounce, a second day of declines.
The yen declined against all 16 of its major counterparts, dropping 1.6 percent to 120.28 per dollar. The U.S. currency climbed 1.4 percent against the euro, paring a drop of 5.4 percent in the previous four days.
The U.S. 10-year note yield rose eight basis points to 2.08 percent, after dropping 19 basis points in the previous four days. German government 10-year yields climbed 10 basis points to 0.69 percent.
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