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 The MSCI world equity index, which tracks shares in 45 countries,
was up 0.3 percent by 6.30 a.m. EDT, having fallen about 10 percent
in four weeks to last week's lows.
The dollar also rose against major currencies, supported by a
surprisingly strong survey of U.S. consumer sentiment and robust
housing starts figures on Friday that signaled solid growth in the
world's biggest economy.
The European Central Bank's announcement that it has started buying
covered bonds as part of a new stimulus package announced in June
had a modest initial impact, lifting some European bank stocks.
"Calm returns after last week's roller-coaster ride," Saxo Bank
trader Andrea Tueni said, adding that although sentiment remained
fragile, stocks appeared to have hit a low.
"U.S. macro data is reassuring, the earnings season has been quite
good so far, and we're getting positive news such as Japan's big
pension fund boosting its exposure to equities."
Japan's $1.2 trillion Government Pension Investment Fund is likely
to raise its allocation for domestic stocks to about 25 percent,
people familiar with the process said on Saturday. The world's
biggest pension fund, its war chest is larger than the annual output
of Mexico's economy.
That news and the upbeat U.S. data fueled a 4 percent surge in
Japan's Nikkei on Monday, its biggest daily rise since June 2013,
helped also by the weaker yen, which is good for the country's
exporters.
MSCI's broadest index of Asia-Pacific shares outside Japan surged
1.2 percent overnight. The pan-European FTSEurofirst 300 index fell
0.5 percent, however, as a profit warning by technology firm SAP hit
the sector.
"Last week's market turmoil largely reflects market technicals and
positioning, rather than a fundamentally justified reassessment of
global growth," UBS economist Larry Hatheway said in a note.
"European data aside, global leading indicators of economic activity
are not pointing to a broad-based slowdown in growth. If anything,
some indicators suggest that growth will actually strengthen
modestly in the period immediately ahead."
Global stocks also got some support from encouraging U.S. earnings
reports. Out of the 81 S&P 500 component companies that have
reported third-quarter results so far, 64.2 percent have beaten
expectations, a rate slightly below the average over the past four
quarters but better than the past 20 years.
Major U.S. companies announcing results on Monday include Apple and
International Business Machines.
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U.S. stock futures were flat to 0.1 percent lower, pointing to a
slow start on Wall Street after all major U.S. stock indexes jumped
more than 1 percent on Friday.
The dollar rose against the safe-haven yen on the encouraging
economic numbers and a pushing back of expectations on when U.S.
interest rates will begin to rise following comments by Federal
Reserve officials last week.
News that Japan's pension fund was also likely to boost its holdings
of overseas assets, spurring demand for foreign currencies, helped.
The dollar index, which measures the greenback against a basket of
six major currencies, rose 0.1 percent to 85.181after dropping to a
three-week low of 84.472 last week.
"The market is more stable today after last week’s volatility. We’ve
seen a tentative pick-up of risk sentiment, and that’s leading to a
recent reversal of safe-haven driven gains," said Lee Hardman, a
currency economist at Bank of Tokyo-Mitsubishi UFJ in London.
Euro zone bond yields dipped as concerns about a slowdown in global
growth eased. German 10-year Bund yields, which set the standard for
euro zone borrowing costs, fell 1 basis point to 0.85 percent, while
Spanish, Italian and most other yields were down 1-2 basis points on
the day.
In commodities, Brent crude steadied around $86 a barrel, holding on
to a rally from near four-year lows last week on news of a cut in
Saudi-Kuwait oil output. But London copper futures fell, hurt by
worries over rising stocks and China's economic growth.
(Additional reporting by Blaise Robinson in Paris, Jemima Kelly in
London and Lisa Twaronite in Tokyo; Editing by Catherine Evans)
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