World markets rise sharply on hopes of further stimulus in Japan, EU

Oil held onto its late-week gains and world stocks rose sharply on Monday, as China's central bank moved to fix the yuan at a higher rate.

Stock markets in Toronto were closed for the Family Day holiday and New York trading was stopped for Presidents Day after a late-week rally that pushed oil up 12 per cent and led to big stock gains.

Stocks in Asia and Europe were up. Japan's Nikkei index rose 7.2 per cent, its second biggest one-day gain in three years and a rebound from last week's slump.

Shares in Germany and France rose three per cent and London's FTSE was up two per cent after European Central Bank head Mario Draghi reiterated his faith in Europe's banks, which have been pushed down in recent market turmoil.

Draghi said the bank would "not hesitate to act" to help stimulate the eurozone economy, a remark interpreted as a sign of further stimulus from the ECB.

Hopes for ECB stimulus

"It's possible we could see calmer markets this week but we are not out of the woods yet," said Thomas Harr, global head of fixed income and currency research at Danske Bank in Copenhagen. "For the last couple of weeks we have seen a bit of central bank fatigue — they have cut rates into negative but it isn't having much of an impact."

There was negative economic news out of China, with news that Chinese exports fell 11.2 per cent in January and imports dropped by 18.8 per cent year-on-year.

But the People's Bank of China set its daily midpoint for yuan trading 0.3 per cent higher. The head of the bank also was quoted criticizing "speculators" for driving down the currency, saying they should not be allowed to dominate market sentiment.

Japan's economy shrank 1.4 per cent in the last quarter because of weak consumer demand and slower exports, reflecting badly on Prime Minister Shinzo Abe's economic revival program.

However, the GDP news seemed to set the stage for more stimulus in Japan to restore growth, and that seemed to encourage investors.

Venezuela talking to Russia

Continued posturing by members of the Organization of Petroleum Exporting Countries and other oil exporters seemed to help oil, with the main Brent international contract trading at $33.33 US a barrel.

Nigeria's oil minister told Reuters there was a shift of mood inside OPEC with members saying there must be a strategy to prop up prices.

Non-OPEC member Russia said on Monday it was in talks on co-ordinated output cuts with individual OPEC members, mainly Venezuela, according to a report on news agency Interfax.