Chinese stimulus sparks global stocks rally

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Published: September 9, 2015 10:48:19 PM

Fresh Chinese stimulus sparked a global stocks rally today in markets that had been coloured red by fears of a slowdown in the world's second-largest economy, with Tokyo surging almost 8 per cent.

Fresh Chinese stimulus sparked a global stocks rally today in markets that had been coloured red by fears of a slowdown in the world’s second-largest economy, with Tokyo surging almost 8 per cent.

The pledge by China’s finance ministry to adopt a “proactive fiscal policy … and accelerate reforms that will help stabilise growth” gave markets a burst of confidence.

Japanese stocks spearheaded an Asian equities rally as investors scooped up shares on the cheap, with buying also boosted by a weak yen and hopes that China’s wild market volatility was ending.

Tokyo’s Nikkei-225 index leapt 7.71 per cent or 1,343.43 points to 18,770.51 by the close.

That was the biggest one-day jump since the global financial crisis and Lehman Brothers bankruptcy of late 2008, when markets faced heavy volatility.

Today’s recovery came after the Nikkei tumbled 2.43 per cent a day earlier, wiping out all of its gains since the start of the year, as weak China trade data aggravated worries about its economy.

The Nikkei had been up almost 20 per cent on the year in late June, before tumbling as China devalued its yuan currency last month, setting off a wave of global volatility.

Hong Kong ended more than four per cent higher while Shanghai and Sydney closed up more than two percent.

In European afternoon trading, London’s benchmark FTSE 100 index of top companies rose 2.13 per cent to 6,276.75 points.

Frankfurt’s DAX 30 climbed 1.85 per cent compared with yesterday’s close to 10,460.98 points and the Paris CAC 40 jumped 2.58 per cent to 4,716.70.

Madrid shot up 2.96 per cent and Milan by 2.13 per cent.

“European markets are taking their lead from a buoyant Asian session, with stocks soaring higher and appearing to have put recent concerns behind them,” said Rebecca O’Keeffe, head of investment at online stockbroker Interactive Investor.

“After weeks of subdued performance in Asia, with fears of lower Chinese growth fuelling negative sentiment, speculation that Chinese policymakers will do more and a seeming shift in investor confidence has seen the strongest rally in Asian stocks since October 2008.”

Wall Street also opened higher, with the Dow Jones Industrial Average climbing 0.86 per cent to 16,634.96 points.

The broad-based S&P 500 rose 0.78 per cent to 1,984.75, while the tech-rich Nasdaq Composite Index gained 0.95 per cent to 4,857.53.

The big gains on stock markets come after weeks of stocks being hammered by concerns about slowing growth in China, whose economy is worth more than 13 per cent of global GDP.

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