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World stocks rebounded today but remained on course for their worst week in almost a year, after a sell-off triggered by global economic growth concerns.
Surprisingly weak Chinese and US economic data, on top of the International Monetary Fund's decision to trim its global growth forecast, has hit commodities from gold to oil this week and brought the recent rally in equity markets to a halt.
With investors lured back by the recent drop in prices, top European shares were up 0.7 per cent by mid-morning, as London's FTSE, Frankfurt's DAX and the Paris CAC-40 bounced 0.4, 0.3 and 0.9 per cent respectively.
But the straight run of losses so far this week left them down almost 2.5 per cent since Monday, their worst weekly performance since November and a fall that has pushed them back to where they began the year.
MSCI's world share index, which tracks around 9,000 stocks in 45 countries, was up 0.3 per cent, but down 2.6 per cent on the week, its heaviest weekly fall since June.
"The weaker Chinese data has combined with the numbers from the US and it has been translated by people, as that the global economy is actually at a much weaker stage than has been price in," said Daiwa Securities economist Tobias Blattner. "I think the correction could continue if we get a snap election in Italy, but if you ignore the political risk I think we are going to go into a phase of muddling through where shares stay roughly where they are, but with a lot of volatility."
The chance of that sudden Italian election appeared to rise after Italy's centre-left Democratic Party (PD) backed former Prime Minister Romano Prodi to become the country's new president.
His nomination is likely to snuff out the slim chances of an alliance government being formed in Rome and lead to re-run of February's inconclusive election, possibly within weeks.
Bond investors were unfazed by the uncertainty, however. Italian government bonds rose slightly, while German bonds, which have edged higher during this week's sell off in riskier assets, dipped back 22 ticks to 146.05.
