Global markets bounced back in impressive fashion on Thursday, as a wave of optimism over the health of the global economy sparked buying of risky assets. Oil prices climbed higher on the day, boosting an energy sector that has been battered in recent weeks by a series of negative developments. Overseas, U.K. government officials expressed support for oil giant BP, with Treasury chief George Osborne noting the “economic value” of the company in Britain and in the U.S. Concerns that the Obama administration may try to halt the company’s dividend payment, a primary source of income to many pension funds, have weighed on shares in recent sessions. Elsewhere, the U.S. trade deficit widened slightly in April, with the value of crude oil imports hitting the highest level in 18 months.
The ETFdb 60 Index climbed 17.21 points, or 1.7%, to close at 1,010.07. Most equity components were up sharply on the day, with fixed income components finishing mostly lower. Trading was heavier than usual, but well below record volumes seen in recent weeks.
The biggest winner on the day was the the Vanguard European ETF (VGK), which finished up 5.2% thanks to an afternoon rally. European equities have exhibited tremendous volatility in recent weeks, as investors around the globe have attempted to interpret the likelihood of a wave of sovereign defaults in the region. Thursday’s surge came after the European Central Bank revised its 2010 economic growth forecast higher. Even after the upward revision, the euro zone growth rate is expected to lag well behind other developed markets this year. The ECB also lowered its outlook for 2011 and announced it would keep a key lending rate at a record low for the 13th consecutive month.
Also surging on Thursday was the Energy Select Sector SPDR (XLE), which added more than 5% on the day. XLE got its boost from an IEA report indicating that oil demand is expected to increase in 2010 and warning that an extension of a drilling ban in the U.S. could have a material impact on crude supplies (see Oil ETF Gets Boost From IEA Report). Even after Thursday’s rally, XLE is still down about 6% over the last month, as anxiety over the political risk facing the industry has spiked.
Disclosure: No positions at time of writing.