Tuesday, October 25 2016


World stocks rally on US data, China stimulus

Update: March, 02/2016 - 11:26

WASHINTON - Strong gains on Wall Street capped a global markets rally on Tuesday rooted in improved US economic data and hopes that new central bank moves will boost the Chinese economy.

The surge in bullishness boosted oil and other commodities, while the save-haven yen sagged and gold prices slipped.

In New York buyers plunged into bank and tech stocks, helping the broad S&P 500 index put on 2.4 per cent, a level last seen on January 6.

Underpinning that were better-than-expected reports on the sluggish manufacturing sector, construction spending and auto sales that showed the US economy still resilient amid the global slowdown.

Earlier, Frankfurt's DAX 30 kicked off the new month with a 2.3 percent upswing as investors eyed possible fresh support from the European Central Bank (ECB) next week and official data showed German unemployment remained at historic lows in February.

Its Paris and London counterparts lagged but still finished the session higher.

The rally started in Asia helped by the People's Bank of China's cut to its reserve requirement for banks, a measure aimed at encouraging investment and spending to keep the economy from slowing too much.

It helped to offset more weak Chinese manufacturing figures. Official data Tuesday showed that February activity shrank at its fastest rate in four years.

The Chinese central bank's announcement boosted the mood across Asian trading floors, with Shanghai jumping 1.7 percent and Tokyo reversing early losses to close up 0.4 percent Tuesday.

India's main stocks index, meanwhile, posted a 3.4 percent gain, its biggest rise since Prime Minister Narendra Modi came to power almost two years ago, after the government presented a budget expected to boost rural demand.

Manufacturing activity in China shrank at its fastest …

Manufacturing activity in China shrank at its fastest rate in four years in February 2016. - AFP Photo 

The major indices across Asia managed to post some fairly solid gains, helping Europe to lift its positive start to the week and push the major European stock markets towards monthly highs," said James Hughes, chief market analyst at traders GKFX.

Also helping were Russian comments that a production freeze by major crude producers is still in the works. That helped crude prices higher, with Brent adding 0.7 percent at $36.81 a barrel and WTI, the US benchmark, gaining 1.9 percent at $34.40.

"Oil and the policy stimulus trade are probably the biggest driver of things at the moment," said Patrick O'Hare of Briefing.com.

Even so, the strength of the buying surprised analysts, amid increasingly glum forecasts, in the US at least, for corporate earnings this year. S&P Capital IQ said it expects corporate earnings in the first quarter will fall by 6.1 percent; earlier a slight increase had been predicted. AFP

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