Stocks

Stocks rise as slowing China growth boosts stimulus prospects

Reuters London | Updated on January 19, 2018 Published on January 19, 2016

global

Shares in Europe and Asia rose and the dollar gained after data showing China’s economy grew last year at its slowest pace in 25 years prompted investors to anticipate more efforts to spur growth.

Oil prices rose after strong Chinese fuel demand halted a slide to 2003 lows triggered by the lifting of sanctions on Iran, while metals prices rose.

Concerns about Chinese authorities’ ability to rebalance the slowing economy have rattled investors this year after a plunge in stock markets and the yuan currency raised concerns growth may be slowing more rapidly.

China’s economy grew 6.9 per cent last year, and 6.8 per cent year-on-year in the fourth quarter, down from 6.9 per cent in the third and the weakest pace since the first quarter of 2009, data showed.

Quarter-on-quarter, growth slipped to 1.6 per cent in the last three months of 2015 from 1.8 per cent in the third.

In a sign of slower growth to come, other data showed retail sales, industrial output and fixed-asset investment last month all came in below the expectations of analysts polled by Reuters.

European shares opened higher, led by miners after metals prices rose following the Chinese data.

The pan-European FTSEurofirst 300 index rose 1.5 per cent. The STOXX Europe 600 Basic Resources index, which includes miners, added 4.1 per cent.

“As figures weaken in absolute terms, we can potentially see additional stimulus measures. That is helping investors’ appetite for risk,’’ Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, said.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.5 per cent, rebounding from a four-year low touched earlier.

Chinese shares rose on strengthened expectations of more stimulus. The CSI 300 index of the largest listed companies in Shanghai and Shenzhen closed up 3.0 per cent, while the Shanghai Composite gained 3.2 per cent, after hitting a 13-month low on Monday.

“Economic weakness has been largely priced in,’’ said Gu Yongtao, strategist at Cinda Securities.

“This year, exports and consumption could remain weak. Investment, another driver of growth, really depends on government’s spending on infrastructure.’’

Tokyo’s Nikkei index rose for the first time in four days, ending 0.6 per cent higher.

The dollar gained against the safe-haven Japanese yen in anticipation of further action by Beijing, possibly as soon as next month.

The U.S. currency gained 0.4 percent 117.76 yen while the euro fell 0.1 percent to $1.0887. The Australian dollar, whose fortunes are closely linked to China, a major market for Australia, rose 0.6 per cent to $0.603.

Low-risk

The rise in stock markets nudged yields on low-risk German government bonds higher. Ten-year yields rose 1.3 basis points to 0.48 per cent.

Oil prices took heart from data showing Chinese fuel demand last year rose compared with 2014, rising 2.5 per cent to 10.32 million barrels a day.

Brent crude, the global benchmark, rose 70 cents a barrel to $29.25. It hit lows not seen since 2003 on Monday on the prospect of Iranian output swelling a global glut.

Copper, of which China is the major consumer, rose 1.9 per cent to $4,463 a tonne, having earlier hit a one-week high at $4,476 a tonne. Nickel prices also rose.

Gold held steady at $1,093 an ounce.

Published on January 19, 2016
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