Dramatic stock market rally runs out of steam

(Reuters) – A dramatic global stock rally faded on Thursday after a fall in Chinese industrial profits offered a reminder of the pressures on the world economy.

Still, an index of world stocks stayed off near two-year lows hit earlier this week before Wednesday’s 1,000 point-plus surge on the U.S. Dow Jones index, which was attributed to the strongest holiday sales in years.

“Yesterday was a blowout day for U.S. equity markets which triggered optimism that this could be a key reversal day but the upward momentum has not really followed through,” said Lee Hardman, an analyst at MUFG in London.

“One reason is that maybe the sharp move higher was driven by year-end rebalancing, which exaggerated the scale of the rebound, and now we have reverted to the trend which has been in place most of this month.”

That trend is toward weaker stock, U.S. dollar and oil prices along with stronger demand for safe-haven government bonds, gold and Japanese yen.

MSCI’s gauge of stocks across the globe shed 0.95 percent and U.S. crude fell 2.01 percent to $45.29 per barrel after each staged big rallies the day prior. [O/R]

Markets in mainland China as well as Hong Kong closed weaker after data showed earnings at China’s industrial firms dropped in November for the first time in nearly three years.

A Reuters report added to the gloom around the world’s second-biggest economy, saying the White House was considering barring U.S. firms from buying telecoms equipment from China’s Huawei and ZTE.

That and an ongoing partial U.S. government shutdown overshadowed

Keep reading this article on Reuters Business.