Global stocks had their biggest weekly gain since April as signs of a slowing economy stoked bets central banks will leave interest rates near record lows for longer, overshadowing escalating tensions in Ukraine.
The MSCI All-Country World Index climbed 1.6 percent for the five days, ending a two-week slide. The Stoxx Europe 600 Index added 1.5 percent, and the Standard & Poor’s 500 (SPX) Index finished with a 1.2 percent increase. The MSCI Asia Pacific Index advanced the most since March, rallying 2.7 percent, while the MSCI Emerging Markets Index jumped 2.8 percent. Warren Buffett’s Berkshire Hathaway Inc.’s Class A shares rose 2.5 percent to trade above $200,000 for the first time.
“You have central banks globally that are still very accommodative and the weaker data this week suggests that they will remain accommodative, and that’s helpful for the market,” Quincy Krosby, a market strategist for Newark, New Jersey-based Prudential Financial Inc., said in a phone interview. “The market all over the world is still focused on central banks.”
Global growth has struggled to gain momentum as the U.S. recovery plods on, Europe grapples with geopolitical tensions and China contends with a property slump and investment-spending slowdown.
European equities rallied and bond yields fell to record lows as prospects of another recession fueled speculation the European Central Bank may boost stimulus measures. Data in the week showed the euro area’s recovery stalled in the second quarter as Germany’s economy shrank 0.2 percent and French gross domestic product was unchanged.
ECB President Mario Draghi committed earlier this month to build on the unprecedented stimulus unveiled in June if the outlook deteriorates.
In Asia, Hong Kong’s benchmark Hang Seng Index ended the week at the highest level since 2010 amid bets China will take steps to support growth. China credit growth and industrial production missed estimates, while Japan’s economy contracted the most since 2011.
In the U.S., data showed retail sales were little changed in July, the worst performance in six months. Applications for unemployment benefits in the U.S. rose more than forecast and consumer sentiment slipped. That was offset by reports showing job openings rose in June to the highest level in more than 13 years and industrial production advanced for a second month in July.
The Federal Reserve is watching economic data to help gauge adjustments to monetary stimulus. The central bank remains on pace to wind down its monthly bond purchases in October. Fed Chair Janet Yellen has said officials will keep its benchmark interest rate low for a “considerable time” after the bond buying ends.
“We’re in a pretty good shape here in the U.S. -- you’re looking at the jobs market that’s improving materially, you’re looking at the low inflation environment, low interest rate environment,” Dean Junkans, the Minneapolis-based chief investment officer for Wells Fargo Private Bank, which oversees $170 billion in client assets, said via phone. “The big risk factor is the geopolitical risks out there, and those are unpredictable.”
Equities briefly tumbled during the last day of the week as tensions in Eastern Europe escalated after Ukraine said it had destroyed part of a military convoy from Russia. The S&P 500 climbed 1.2 percent in the previous four days amid optimism the conflict was easing. President Vladimir Putin said Aug. 14 that Russia shouldn’t isolate itself from the outside world, as he pledged to work to halt the conflict.
The MSCI Emerging Markets Index rose 2.8 percent for the week, advancing for five straight days. Russia’s Micex Index (INDEXCF) gained 5.2 percent, the most since March.
The S&P 500 ended the week 1.7 percent below its all-time high of 1,987.98 reached July 24. The Chicago Board Options Exchange Volatility Index (VIX), which usually moves in the opposite direction to the S&P 500, lost 17 percent in the five-day period, the most since April.
Nine of the 10 main S&P 500 groups advanced. Health-care stocks had the biggest gain, advancing 2.3 percent. Energy shares had the worst performance as oil touched a six-month low, helping to erase the year’s gains in the Bloomberg Commodity Index. (BCOM)
Monster Beverage Corp. soared 35 percent to a record $93.49 after Coca-Cola Co. agreed to buy a stake in the company. Monster had the biggest gain in the Nasdaq 100 Index, helping the gauge finish the week at a 14-year high.
Intel Corp. advanced 4.8 percent as the world’s largest computer-chip maker agreed to acquire Avago Technologies Ltd.’s Axxia networking business for $650 million.
InterMune Inc. jumped 19 percent, touching the highest since October 2000, after people with knowledge of the matter said the company received takeover bids from some of Europe’s biggest drugmakers, including Sanofi and Roche Holding AG.
Macy’s Inc. (M) tumbled 4.6 percent, the most since April, as the retailer missed quarterly earnings estimates and trimmed its annual sales forecast, indicating that the back-to-school and Christmas shopping seasons won’t make up for a sluggish first half of the year.
Cisco Systems Inc. declined 2.4 percent after forecasting little to no sales growth.