World stocks surged on Thursday, following the biggest gains on Wall Street in four years, after a US Federal Reserve policymaker said the case for an interest rate increase next month “seems less compelling” than it was a few weeks ago.

Increased appetite for risk also lifted crude oil prices further from last week’s lows. The price of government bonds and the Japanese yen fell.

At midday in Europe the FTSEuroFirst index of leading 300 European shares was up 3% at 1,420 points. Germany’s DAX and France’s CAC 40 were also up around 3%. Britain’s FTSE 100 was up 2.4%.

“The bounce in Wall Street and stabilisation in Asia are causing the market to rally back,” said Clairinvest fund manager Ion-Marc Valahu. “My short-term indicators are telling me that we hit a bottom in the market earlier this week.”

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New York Fed President William Dudley said on Wednesday that arguments for a September rate increase “seems less compelling” than they had only weeks ago, given the threat posed to the US economy by recent market turmoil.

Markets around the world plunged earlier in the week as a slump in Shanghai shares fuelled worries over China’s economic health. Some calm returned after Beijing moved to ease policy late on Tuesday.

The two main Chinese indices surged 5.3% and 5.9% on Thursday, snapping a five-day losing streak that had wiped off around 20% from market value and sent tremors around global financial markets.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 2.7%, pulling away from a three-year low reached earlier in the week and chalking up its best day in three years.

Tokyo’s Nikkei ended up 1.1%, adding to the previous day’s 3.2% gain, after US stocks racked up their biggest one-day gain in four years.

US futures pointed to a rise of around 1% at the open on Thursday, adding to the previous day’s rise of almost 4%.

Damage done

Dudley’s comments on Wednesday came amid alarming market volatility and just before many of the world’s top central bankers gather at an annual conference in Jackson Hole, Wyoming. Investors will be watching the conference for clues on how the turmoil may be shaking up policy plans.

Dudley also warned about over-reacting to “short-term” market moves, leaving the door ajar to raising rates when the Fed meets on 16-17 September.

“The damage to developed market shares has been done, though, with the S&P500 still down 7.5% on the month,” noted Simon Smith, chief economist at FxPro in London.

Emerging markets stocks and currencies were rebounding on Thursday after Dudley’s comments and a recovery by Chinese equities. MSCI’s benchmark emerging market stocks index surged 2.5% as it looked to top Tuesday’s best day in two years.

Ukraine’s central bank became the 39th monetary authority to ease policy this year, cutting interest rates to 27% from 30% to support flagging growth. Ukraine also reached a deal with a group of creditors to restructure $18 billion of debt.

In currencies, the Japanese yen fell as investors rediscovered their appetite for risk.

The dollar rose back above 120 yen, up a quarter of one% on the day and recovering from a seven-month low of 116.15 yen plumbed on Monday. The euro rose above 136 yen.

The euro slipped against the dollar to $1.1300, after losing 1.7% in the previous session. It reached a seven-month peak of $1.1715 on Monday.

The euro was kept under pressure by comments from a senior European Central Bank official. Peter Praet said falling commodity prices and weakness in some overseas economies had increased the chances the ECB would miss its inflation target.

The yield on 10-year German bonds rose 3 basis points to 0.74%. The equivalent US Treasury yield was steady at 2.16%, having slumped as low as 1.91% on Monday.

Crude oil rebounded

US crude futures bounced nearly 4% to $ 40.00 a barrel. The contracts had slumped to a 6 1/2-year low on Monday, dogged by a supply glut and worries about China’s economy. Brent also rose nearly 4% to $ 44.66. Copper was up about 1.2% at $5,000 a tonne, moving further away from Monday’s six-year low of $ 4,855.

Gold regained some lost ground after suffering its biggest fall in five weeks overnight as the dollar rebounded and US stocks rallied. Spot gold rose about 0.2% to $ 1,127 an ounce.

Oil prices rise more than 4.5%

London (Reuters): Oil prices jumped more than 4.5% on Thursday after a rally in equity markets and an unexpected fall in US crude inventories, but worries over the Chinese economy and a global oil glut kept the outlook uncertain.

Oil markets moved up from six-and-a-half-year lows reached earlier this week, but investors are still worried about huge fuel oversupply, which is depressing oil for immediate delivery and filling stockpiles worldwide.

“The trend is strong and down. However, do not be wrong-footed by a correction higher,” PVM Oil Associates technical analyst Robin Bieber said. “Few markets head forever in one direction with no respite.”

Front-month Brent, the global oil benchmark, was up $ 1.90 at $ 45.04 a barrel by 1100 GMT. US crude, also known as West Texas Intermediate (WTI), was up $ 1.80 at $ 40.40 a barrel.

US second-quarter GDP growth rate revised up to 3.7%

Washington (Reuters): The US economy grew faster than initially thought in the second quarter on solid domestic demand, showing fairly strong momentum that could still allow the Federal Reserve to hike interest rates this year.

Gross domestic product expanded at a 3.7% annual pace instead of the 2.3% rate reported last month, the Commerce Department said on Thursday in its second GDP estimate.

The GDP report, which was released in the wake of a global stock market sell-off, should offer assurance to both investors and cautious Fed officials that the United States was in good shape to weather the growing strains in the world economy.

Concerns over slowing economic growth in China sent global equity markets into a tailspin last week, raising doubts that the US Central Bank would raise its short-term interest rate next month.

On Wednesday, New York Fed President William Dudley said that prospects of a September lift-off in the central bank’s key lending rate “seems less compelling to me than it was a few weeks ago.”

The upward revisions to second-quarter growth also reflected the accumulation of $ 121.1 billion worth of inventories, up from the previous estimate of $ 110 billion. That meant inventories contributed 0.22% age point to GDP instead of subtracting 0.08%age point as reported last month.

While the huge inventory build will likely weigh on growth in the third quarter, the blow could be softened by rebounding business investment on capital goods.

Economists polled by Reuters had expected that second-quarter GDP growth would be revised to a 3.2% rate.

Underscoring the economy’s solid fundamentals, a measure of private domestic demand, which excludes trade, inventories and government expenditures, increased at a 3.3% rate, instead of the previously reported 2.5% pace.

Consumer spending, which accounts for more than two-thirds of US economic activity, grew at a 3.1% rate, rather than the 2.9% pace reported last month. Consumer spending got off to a brisk start in the third quarter, with retail sales rising solidly in July.

A strong labor market, cheaper gasoline and relatively higher house prices, which are boosting household wealth, are helping to support consumer spending.

Investment in nonresidential structures was revised to show it rising at a 3.1% rate, reflecting stronger spending on commercial and healthcare construction. It was previously reported to have contracted at a 1.6% pace.

Spending on residential construction was raised to a 7.8% pace from a 6.6% rate. Business spending on equipment was not as weak as initially thought.