Equilibrium returned to China’s stocks after Thursday’s turmoil as the central bank Governor Zhou Xiaochuan said policy makers have room for further easing to stimulate economic growth.
The Shanghai Composite Index climbed 1 percent to 2,767.21 at the close, after plunging 6.4 percent Thursday. Stocks tumbled amid signs of tighter liquidity and concern that planned reforms of initial public offerings will lead to an increased supply of small-company shares. The regulator denied speculation the new registration system will begin with the ChiNext small-cap board. Energy producers led gains in Shanghai and Hong Kong, where the benchmark gauge jumped 2.6 percent at 3:26 p.m. local time.
China’s policy makers are seeking to project an image of stability in the nation’s financial markets after months of turbulence reverberated across the world and as the economy slows. Finance chiefs and central bankers from the Group of 20 are meeting in Shanghai, while the annual meeting of the legislature begins in Beijing next week. China still has “some monetary policy space” and “multiple policy instruments to address possible downside risks,” Zhou said.
U.S. stocks climbed, after the Standard & Poor’s 500 Index dropped to its lowest level in two months since October, as investors concerned that global growth will slow were soothed by China’s signal that it may add to stimulus.
The S&P 500 rose 0.8 percent to 2,021.99 at 9:32 a.m. in New York, after sliding 1.8 percent Friday to its lowest since Oct. 14 and posting its biggest two-day decline in three months.
China’s leaders signaled Monday they will take further steps to support growth, including widening the fiscal deficit and stimulating the housing market, to put a floor under the economy’s slowdown. Monetary policy must be more “flexible” and fiscal policy more “forceful” as leaders create “appropriate monetary conditions for structural reforms,” according to statements released at the end of the government’s Central Economic Work Conference by the official Xinhua News Agency.
Investors have wavered between optimism on the U.S. economy and concern that a slowdown on China will spread. Worries about weakness in the world’s second-largest economy were stoked by a surprise currency devaluation in August, triggering the S&P 500’s first correction in four years. The gauge rebounded as much as 13 percent from a summer low through early November, before giving up 4.9 percent through last week.
The equity benchmark has fallen 3.6 percent in December through Friday, bucking the historical seasonal trend of gains, and is on track for its biggest annual drop since the 2008 financial crisis. That puts even more pressure on the so-called Santa Claus rally to save the year. Historically, the final two-weeks of December deliver a gain of 1.7 percent.
Investors initially reacted positively to the message from Fed policy makers who signaled last week a belief that the U.S. economy is performing well while emphasizing no rush to further boost interest rates. Turbulence in commodities markets and the implications for global growth quickly drew renewed attention as oil collapsed below levels last seen during the 2008 global financial crisis on signs the market’s oversupply will worsen.
Fed officials have stressed that the rate path depends on progress in economic data. Reports later this week on home sales, durable-goods orders and personal income will offer cues. U.S. equity markets will close early on Dec. 24 and reopen on Dec. 28.
Source : Bloomberg