World Stocks Gain as China Wobbles Ease

GLOBAL stocks yesterday rebounded as China’s wobbling market clawed back some of its steep losses and oil prices jumped on signs of improving demand.

The 20% drop in the Shanghai benchmark since August 4 sent ripples of fear through world markets this week as investors fretted the government might tighten credit that has helped fuel a massive rally in Chinese stocks since March.
Some of those fears dissipated today with an unexpected fall in US crude inventories raising hopes of recovery from recession and solid gains in Chinese stocks.
The Shanghai index surged 126 points, or 4,5%, to 2,911.58, while Japan’s Nikkei 225 stock average advanced 179,41 points, or 1,8%, to 10 383,41. Hong Kong’s Hang Seng rose 374,63, or 2%, to 20 336,36.
Elsewhere, South Korea’s Kospi and India’s Sensex were both up nearly 2%.
As Europe opened trading, Britain’s FTSE 100 was up 1,2% at 4 746,08, while Germany’s DAX gained 1,3% to 5 300,42.
France’s CAC 40 rose 1,5% to 3 501,33.
US stock index futures also pointed to gains on Wall Street.
The recent drop in China’s market “is a correction, not a crash”, said Arjuna Mahendran, chief of Asian investment strategy at HSBC Private Bank in Singapore.
It reflects a clampdown on the use of loans to buy stocks and reality setting in about corporate profits after analysts were too optimistic with their first-half forecasts, he said.
“The flow of funds into the Chinese stock market is being curtailed by the central bank and that is a good thing. They are trying to douse some of the excesses in the market,” he said.
To ride out the global economic slump, the world’s third-biggest economy has been pumped up with a $586 billion economic stimulus plan that calls for building new infrastructure such as roads. Bank lending to finance those works has surged, with some of that money improperly diverted into stocks and driving gains this year that until recently neared 90%.
Across Asia, resource stocks were lifted by oil rocketing above $72. Japanese oil explorer and producer Inpex Corp. was up 2.3% in Tokyo and Woodside Petroleum Ltd. vaulted 6,7% in Sydney.
Benchmark crude for September delivery was down 8 cents at $72.31 after jumping $3.23 overnight on news that US crude in storage fell by 8.4 million barrels last week, suggesting an uptick in demand. Gasoline held in storage fell as well.
The unexpected drop in oil inventories coaxed Wall Street to a higher close yesterday. The Dow Jones industrials rose 61,22, or 0,7%, to 9 279,16. The Standard & Poor’s 500 index rose 6,79, or 0,7%, to 996,46, while the Nasdaq composite index rose 13,32, or 0,7%, to 1,969.24.
Stock futures were up, suggesting Wall Street would climb higher. Dow futures were up 44, or 0,5%, at 9,320, and S&P futures rose 5,9 points, or 0,6%, at 1,003. –– AP.

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