Global stocks surge most since 2012

Global stocks surged the most in 3 1/2 years Friday, as U.S. equities joined a rally that pushed oil to its best two days since 2009 on speculation that central banks will expand stimulus measures to counter turmoil in financial markets.

Haven assets from Treasuries to gold retreated.

MSCI Inc.’s gauge of the world’s equities climbed 2.6 percent as benchmarks from Asia to Europe and America rebounded from one of the worst starts to a year on record. The Standard & Poor’s 500 index capped its best day in six weeks. European shares enjoyed the biggest two-day rally since 2011, while the euro fell to a two-week low on the European Central Bank’s signal it may bolster economic support. Asian stocks climbed the most since September on speculation Japan and China may also take steps to calm markets. Yields on 10-year Treasury notes rose above 2.05 percent.

The turnaround in sentiment came amid signs central banks may be prepared to act after $7.8 trillion was erased from the value of global equities this year on China’s slowdown and oil’s crash. Diminished inflation expectations and a strengthening yen are seen as increasing pressure on the Bank of Japan to enlarge stimulus at its meeting this week. China will keep intervening in its equity market to “look after” investors and has no intention of further devaluing the yuan, Vice President Li Yuanchao said.

“It’s a classic oversold bounce after Draghi’s comments yesterday and the noise on Japanese stimulus overnight, the question is where do we go from here,” said Veronika Pechlaner, who helps oversee $10 billion at Ashburton Investments, part of FirstRand Group. “It’s become harder and harder for stimulus to really support the economic fundamentals so it doesn’t mean a medium- and long-term change, but at least we have a bit more stable trading environment for a couple of days.”

First advance of year

The S&P 500 jumped 2 percent at 4 p.m. Friday in New York, leaving it higher by 1.4 percent in its first weekly advance this year. The gauge pared its drop in 2016 to 6.8 percent, and it remains 11 percent below its all-time high set in May. The Dow Jones Industrial Average climbed 1.3 percent, with gains tempered by the biggest one-day slide in American Express Co. since 2009.

“It looks like central banks are on the warpath against weakness,” said Andrew Brenner, head of international fixed income for National Alliance Capital Markets in New York. “That’s going to put a real risk-on component to today. You’ve seen enough volatility in the last six months that it’s hard to determine if we’re going to close up. At this point, it looks very positive.”

Purchases of previously owned U.S. homes rose more than projected in December, helped in part by warmer weather and wrapping up the best year since 2006. The Conference Board’s measure of the economic outlook for the next three to six months fell 0.2 percent in December after rising 0.5 percent the month before, the New York-based research group said Friday.

The Stoxx Europe 600 index rose 3 percent, rallying 5 percent in two days. The index advanced 2.6 percent in the week after rising the most in a month Thursday following Draghi’s indication that monetary policy will be reviewed as early as March.