S&P 500 in biggest one-day gain for a year

Tuesday 21:35 BST. Bulls regained the upper hand in US and European stock markets as the prospect of further central bank policy accommodation, plus a well-received set of earnings from Apple, helped offset news of a slowdown in Chinese economic growth.

Stocks on Wall Street surged, with the S&P 500 posting its biggest one-day gain in the past year, up 2 per cent at 1,941 points. The broad measure of US stocks is up 4.2 per cent since last Wednesday and back above its 200-day moving average.

US Treasuries fell, pushing the yield on the 10-year note 3 basis points higher to 2.22 per cent. Yields on the note are now back at levels seen before last Wednesday's sharp rally, which briefly sent the yield down to 1.86 per cent.

Meanwhile, the euro retreated and German government bond prices fell following reports that the European Central Bank was considering buying corporate bonds on the secondary market, perhaps as early as next year, as part of its efforts to encourage lending across the region.

The ECB began buying covered bonds on Monday, but expanding its asset purchase programme to encompass riskier corporate bonds would be a big step.

One person familiar with the matter told the FT that while corporate bond purchases were an option that policy makers had discussed in recent months, preparations for buying the debt had not intensified in recent weeks.

The person said corporate bond purchases were being considered, along with other ideas, as a possible means to extend the ECB's programme of private sector asset purchases should inflation and growth in the eurozone continue to disappoint.

However, the person said the ECB had not yet put the issue of buying corporate bonds on the agenda for its December policy meeting. Two officials from eurozone central banks said they had no knowledge that plans to buy corporate bonds had developed.

Nevertheless, the report provided a much-needed lift to Europe's equity markets as participants continued to put last week's turbulence behind them.

The FTSE Eurofirst 300 climbed 2.1 per cent, taking the index back above where it ended a week ago, before a two-day sell-off drove it down as much as 6 per cent, while the main Italian and Spanish stock indices climbed 2.8 per cent and 2.4 per cent respectively.

The yield on the 10-year German government bond rose 2 basis points to 0.87 per cent.

But "peripheral" sovereign eurozone yields moved in the opposite direction as risk aversion in the markets continued to moderate. The Greek 10-year yield fell back below 8 per cent.

In the currency markets, the euro was down 0.6 per cent at $1.2721, and 0.3 per cent lower versus sterling at 78.92p. The euro's dip helped ensure the dollar resumed its broad upward momentum, gaining 0.4 per cent against a weighted basket of its peers, following a recent retreat from a four-year high.

The firmer tone of the dollar failed to hurt the gold price, as the metal edged up $2 to a six-week high of $1,247 an ounce.

On Wall Street, Apple gained ground after its quarterly revenues and earnings easily beat analysts' forecasts, and other tech stocks also benefited from positive results.

The CBOE Vix index of implied equity volatility continued to retreat, sliding nearly 12 per cent in late trade to 16.40 - after climbing above the 30 level last week for the first time in three years.

But the mood across most Asian equity markets was less cheerful, with the Nikkei 225 in Tokyo sliding 2 per cent after Monday's 4 per cent jump, and the Shanghai Composite falling 0.7 per cent.

Those losses followed news that Chinese GDP had expanded by 7.3 per cent in the third quarter from a year earlier, down from 7.5 per cent in the previous three-month period and the slowest pace of growth in more than five years.

But Danae Kyriakopoulou at the Centre for Economics and Business Research said it was unlikely that Beijing would launch another stimulus package of a similar magnitude and force to the ones seen earlier this year.

"There has been much rhetoric pushing for 'the right kind of growth' and so we expect reforms and rebalancing to take priority over stimulus.

"Having said that, data from September have so far been pointing to a rebound - even without government stimulus we expect China to achieve growth of 7.4 per cent or above in the fourth quarter and therefore maintain our forecast for 7.5 per cent growth over the year."

Copper initially weakened in response to the data, but rallied as the session wore on to finish 1.6 per cent higher in London at $6,668 a tonne. Brent crude settled 82 cents higher at $86.22 a barrel.

Additional reporting by Vivianne Rodrigues in New York

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