NEW YORK: US and European stocks climbed Tuesday as higher oil prices more than offset a downcast global growth outlook from the IMF that warned of severe consequences from a so-called “Brexit.”
Equities linked to petroleum and other commodities were strong on both sides of the Atlantic as oil prices shot up to their highest level of 2016 on reports of an agreement between Saudi Arabia and Russia on freezing output ahead of a meeting of major producers on Sunday.
The Nikkei 225 in Tokyo also got a boost as the yen fell back from recent highs following a warning from Finance Minister Taro Aso that the Japanese government could take action in the forex market to stem the unit’s steep rise.
The equities gains were notable after the International Monetary Fund trimmed its growth forecast for 2016 and warned of “severe” damage should Britain quit the European Union. The warning came just days before official referendum campaigning begins for the June 23 vote.
The Fund cut its global forecast for the third straight quarter, saying economic activity has been “too slow for too long,” and calling for immediate action by the world’s economic powers to shore up growth.
The Fund slashed its 2016 estimates for most regions, including the US and eurozone, although it slightly upgraded its China estimate.
Still, investors largely overlooked the IMF report.
“If you’re trading based on the economic forecast from the IMF, your view is going to be lagging, not leading the market,” said Michael James, managing director of equity trading at Wedbush Securities.
