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Shares chase Wall Street higher despite China fears

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European and Asians stock markets chased Wall Street higher Thursday after days of wild swings, but dealers warned that the spectre of the slowing Chinese economy means more turbulence ahead.

Equities were also boosted by one of the most senior Federal Reserve officials declaring recent China turmoil had weakened the case for a US interest rate rise in September.

In late Thursday morning deals, the Frankfurt and Paris stock exchanges rebounded by more than three percent and London gained over two percent.

All three European bourses slumped around one percent on Wednesday, with investors putting jitters over China's flagging economy on hold.

"European equities are trading higher... receiving a boost from firmer markets overnight in the US and Asia," said analyst Markus Huber at brokerage Peregrine & Black.

"For now there is quite a bit of relief that stocks in China are finally staging a moderate and long-awaited bounce back."

- More volatility ahead? -

Asian equities took their cue from Wall Street on Thursday, rallying after several tumultuous days, but dealers cautioned that enduring concerns about Chinese economic slowing would spell more volatility.

Shanghai soared 5.34 percent to end the worst five-day rout for almost two decades, cheered partly by this week's interest rate cut from the People's Bank of China (PBoC) aimed at boosting the world's second-largest economy representing some 13 percent of global GDP.

Traders work on the floor of the New York Stock Exchange  during the afternoon of August 26  2015
Traders work on the floor of the New York Stock Exchange, during the afternoon of August 26, 2015
Andrew Burton, Getty/AFP

In addition, after a strong rise in the last hour of Shanghai trade, brokers said there was speculation over state buying or a possible top-level meeting of the State Council, or cabinet, which could detail more measures to support the market.

"There were external funds flowing in, but it's uncertain if it was the national team," Shenwan Hongyuan analyst Gui Haoming said, referring to entities which trade on behalf of the government.

Qian Qimin, also of Shenwan Hongyuan, added investors were "expecting pension funds will enter the market."

China said Sunday that its huge state pension fund will be allowed to invest up to 30 percent of assets -- which totalled 3.5 trillion yuan at the end of 2014 -- in stocks.

Elsewhere in Asia, Hong Kong shares hurtled 3.60 percent higher, Tokyo gained 1.08 percent, Sydney added 1.17 percent and Seoul rose 0.73 percent.

Graphic charting the performance of Shanghai Composite Index over five days
Graphic charting the performance of Shanghai Composite Index over five days
Adrian Leung, AFP

World markets had suffered a torrid start to the week on "Black Monday", when Shanghai collapsed by almost 8.50 percent and sparked fears China's slowdown could herald a global recession.

Concerns the US could raise rates as early as next month have also been heaping pressure on world markets.

But investors cautioned that the rout, which wiped $8 trillion off world shares in just over two weeks and battered commodities and emerging market currencies, was far from over.

- Sentiment remains 'fragile' -

"Black Monday created a lot of fear in the markets leaving the central bank with little option but to step in a stop the rout," said Oanda analyst Craig Erlam.

"The fact that we're seeing markets rebounding strongly today following a similarly strong rally in the US on Wednesday suggests the fear is now passing... (But) sentiment is likely to remain fragile for a little while and more surges in volatility is likely to create more panic in the markets."

Tokyo stocks rose 1.89% on August 27  2015  casting off more China-linked losses following a surge o...
Tokyo stocks rose 1.89% on August 27, 2015, casting off more China-linked losses following a surge on Wall Street driven by hints that the Federal Reserve would not raise interest rates next month
Kazuhiro Nogi, AFP

New York snapped a six-day losing streak on Wednesday after the head of the New York branch of the Fed, William Dudley, said China turmoil had weakened the argument for a rate hike next month.

The S&P 500 surged 3.90 percent, the Dow Jones Industrial Average added 3.95 percent, and the Nasdaq Composite was up a heady 4.24 percent, with sentiment bolstered by upbeat US durable goods orders.

Asian shares had ended the day mixed on Wednesday after a volatile session that saw Shanghai veer wildly between losses and gains as dealers weighed news that China's central bank had cut its key rates and freed up cash for banks.

Shanghai stocks have been on a roller-coaster ride after a debt-fuelled, year-long rally collapsed in June, prompting Beijing to unleash unprecedented measures to shore up the market -- including buying up shares.

While the slump in Shanghai may have a limited impact on the broader economy it reflects investors' views that the sky-high valuations of quoted companies are not justified.

In London currency trading, the dollar bought 120.27 yen up from 119.98 yen in late New York on Wednesday.

The European single currency rose to 135.83 from 135.72 yen, but fell against the dollar to $1.1294 from $1.1312.

European and Asians stock markets chased Wall Street higher Thursday after days of wild swings, but dealers warned that the spectre of the slowing Chinese economy means more turbulence ahead.

Equities were also boosted by one of the most senior Federal Reserve officials declaring recent China turmoil had weakened the case for a US interest rate rise in September.

In late Thursday morning deals, the Frankfurt and Paris stock exchanges rebounded by more than three percent and London gained over two percent.

All three European bourses slumped around one percent on Wednesday, with investors putting jitters over China’s flagging economy on hold.

“European equities are trading higher… receiving a boost from firmer markets overnight in the US and Asia,” said analyst Markus Huber at brokerage Peregrine & Black.

“For now there is quite a bit of relief that stocks in China are finally staging a moderate and long-awaited bounce back.”

– More volatility ahead? –

Asian equities took their cue from Wall Street on Thursday, rallying after several tumultuous days, but dealers cautioned that enduring concerns about Chinese economic slowing would spell more volatility.

Shanghai soared 5.34 percent to end the worst five-day rout for almost two decades, cheered partly by this week’s interest rate cut from the People’s Bank of China (PBoC) aimed at boosting the world’s second-largest economy representing some 13 percent of global GDP.

Traders work on the floor of the New York Stock Exchange  during the afternoon of August 26  2015

Traders work on the floor of the New York Stock Exchange, during the afternoon of August 26, 2015
Andrew Burton, Getty/AFP

In addition, after a strong rise in the last hour of Shanghai trade, brokers said there was speculation over state buying or a possible top-level meeting of the State Council, or cabinet, which could detail more measures to support the market.

“There were external funds flowing in, but it’s uncertain if it was the national team,” Shenwan Hongyuan analyst Gui Haoming said, referring to entities which trade on behalf of the government.

Qian Qimin, also of Shenwan Hongyuan, added investors were “expecting pension funds will enter the market.”

China said Sunday that its huge state pension fund will be allowed to invest up to 30 percent of assets — which totalled 3.5 trillion yuan at the end of 2014 — in stocks.

Elsewhere in Asia, Hong Kong shares hurtled 3.60 percent higher, Tokyo gained 1.08 percent, Sydney added 1.17 percent and Seoul rose 0.73 percent.

Graphic charting the performance of Shanghai Composite Index over five days

Graphic charting the performance of Shanghai Composite Index over five days
Adrian Leung, AFP

World markets had suffered a torrid start to the week on “Black Monday”, when Shanghai collapsed by almost 8.50 percent and sparked fears China’s slowdown could herald a global recession.

Concerns the US could raise rates as early as next month have also been heaping pressure on world markets.

But investors cautioned that the rout, which wiped $8 trillion off world shares in just over two weeks and battered commodities and emerging market currencies, was far from over.

– Sentiment remains ‘fragile’ –

“Black Monday created a lot of fear in the markets leaving the central bank with little option but to step in a stop the rout,” said Oanda analyst Craig Erlam.

“The fact that we’re seeing markets rebounding strongly today following a similarly strong rally in the US on Wednesday suggests the fear is now passing… (But) sentiment is likely to remain fragile for a little while and more surges in volatility is likely to create more panic in the markets.”

Tokyo stocks rose 1.89% on August 27  2015  casting off more China-linked losses following a surge o...

Tokyo stocks rose 1.89% on August 27, 2015, casting off more China-linked losses following a surge on Wall Street driven by hints that the Federal Reserve would not raise interest rates next month
Kazuhiro Nogi, AFP

New York snapped a six-day losing streak on Wednesday after the head of the New York branch of the Fed, William Dudley, said China turmoil had weakened the argument for a rate hike next month.

The S&P 500 surged 3.90 percent, the Dow Jones Industrial Average added 3.95 percent, and the Nasdaq Composite was up a heady 4.24 percent, with sentiment bolstered by upbeat US durable goods orders.

Asian shares had ended the day mixed on Wednesday after a volatile session that saw Shanghai veer wildly between losses and gains as dealers weighed news that China’s central bank had cut its key rates and freed up cash for banks.

Shanghai stocks have been on a roller-coaster ride after a debt-fuelled, year-long rally collapsed in June, prompting Beijing to unleash unprecedented measures to shore up the market — including buying up shares.

While the slump in Shanghai may have a limited impact on the broader economy it reflects investors’ views that the sky-high valuations of quoted companies are not justified.

In London currency trading, the dollar bought 120.27 yen up from 119.98 yen in late New York on Wednesday.

The European single currency rose to 135.83 from 135.72 yen, but fell against the dollar to $1.1294 from $1.1312.

AFP
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With 2,400 staff representing 100 different nationalities, AFP covers the world as a leading global news agency. AFP provides fast, comprehensive and verified coverage of the issues affecting our daily lives.

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