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Asian Shares Follow Wall Street Higher, With No Letup in Volatility in China Asian Shares Follow Wall Street Higher, With China Joining the Rebound
(about 3 hours later)
HONG KONG — Markets across Asia opened higher on Thursday following Wall Street’s strong rebound on Wednesday, but stocks in China showed continued volatility, even in the early minutes of trading. HONG KONG — Markets across Asia rose on Thursday following Wall Street’s strong rebound on Wednesday, but stocks in China showed continued volatility, although muted compared with recent days.
The markets appeared to be headed toward their first broad rally — if a modest one — in Asia since last week, helped along by soothing words from the Federal Reserve suggesting that interest rate increase in the United States might not be as imminent as had been believed. Asia markets appeared to be headed toward their first broad rally since last week, helped along by hints from the Federal Reserve that interest rate increases in the United States might not be as imminent as had been believed.
Japanese stocks shot up for a second straight day, rising about 2 percent, and Australian shares were also trading higher. In China, where markets have been roiled by volatility for days, the main Shanghai index opened up more than 2 percent higher, soon shot up to a gain of 3 percent, retreated to a rise of 1 percent and was up 2.3 percent by midmorning. Japanese stocks shot up for a second straight day, rising 1.2 percent by midafternoon. Australian shares were also trading higher, up 1.3 percent. In China, the main Shanghai index opened more than 2 percent higher, soon surged to a gain of 3 percent, retreated to barely positive territory and was up 1.2 percent by midafternoon.
Global markets tumbled last week over concerns about China’s weakening economy and its ability to manage the slowdown. The prospect of a rise in American interest rates by the Federal Reserve has also rattled investors, who have been retreating from once-favored emerging markets like Brazil, Russia and Indonesia. Global markets tumbled last week over concerns about China’s ability to manage its economic slowdown and the weakness of once-favored emerging economies. The Chinese markets plunged in June after a rally that more than doubled share values in a year, and continued to defy government moves to prop them up.
On Wednesday, however, stocks in the United States roared higher after six days of losses. They closed up about 4 percent after William C. Dudley, president of the Federal Reserve Bank of New York, raised the prospect of interest rates remaining low for a while yet. Broader efforts to stoke the economy, including a devaluation of the renminbi, did little to reassure investors and fueled suspicions that growth in China is worse than official figures show.
At a news briefing in New York, Mr. Dudley said that the recent turmoil in the global financial markets was a risk to the United States economy. Crucially, he added that he found the prospect of raising interest rates next month “less compelling.” After maintaining a silence on the stock market until early in the week, People’s Daily, the Communist Party newspaper, released a report quoting experts saying that market volatility cannot be attributed to China.
“As for capital markets, China’s capital markets do not have strong inter-connectivity with international markets,” the report said. “There is no basis for the view that international capital markets feel the impact and shock waves from China’s capital markets.”
Citing Lian Ping, the chief economist for the Bank of Communications, the report also said that “supervision of capital markets must be strengthened, and in particular illegal activities that cause market volatility and damage to market confidence must be harshly attacked.”
Analysts at Standard Chartered wrote in a research note that the recent plunge was “a further correction to better reflect China’s economic fundamentals, rather than a sign of sharp deterioration in the real economy.” They expect the Chinese central bank to loosen monetary policy even further before the end of the year, noting that “the government’s missteps in the stock market have caused collateral damage to public confidence in its ability to stabilize growth.”
Fears that weakness in China would reverberate across the globe had been compounded by the prospect that the Federal Reserve would soon raise interest rates.
After six days of losses, stocks in the United States surged about 4 percent on Wednesday after William C. Dudley, president of the Federal Reserve Bank of New York, suggested that the cheap money that has buoyed markets might run on a little longer. Futures contracts indicated that United States markets would open still higher on Thursday.
At a news briefing in New York, Mr. Dudley, who is also vice chairman of the Federal Open Market Committee, which sets interest rates, said that the recent turmoil in the global financial markets was a risk to the United States economy. Crucially, he added that he found the prospect of raising interest rates next month “less compelling.”
Investors will be watching the annual conference for monetary policy makers in Jackson Hole, Wyo., this weekend, which may give more of an indication on the Fed’s position on raising rates. Stanley Fischer, the Fed’s vice chairman, is scheduled to speak on Saturday.
Lim Say Boon, the chief investment officer for DBS Bank in Singapore, questioned any optimism over maintaining interest rates at their current low level. “If markets are unhappy about a September rate hike, would they be happy with a December hike?” he wrote in an analyst note on Thursday. “I am not sure what ‘victory’ would look like for those in the market who are ‘rioting’ against a rate hike in September. There is also a risk of the Fed being seen as hostage to an angry mob in the market — cowed because the mob is smashing up the ‘furniture.’ ”
A late-day sell-off in Europe on Wednesday meant that shares in that region missed the rally, finishing the day down almost 1.5 percent.A late-day sell-off in Europe on Wednesday meant that shares in that region missed the rally, finishing the day down almost 1.5 percent.
Currencies that had been under pressure, like the Taiwan dollar, enjoyed some partial relief Thursday, rising modestly against the dollar. But the Malaysian ringgit sank lower. Commodities, many of which are near their lowest levels since the financial crisis, also bounced back, with oil and copper futures trading higher. Currencies that had been under pressure, like the Taiwan dollar, enjoyed some partial relief Thursday, rising modestly against the dollar. But the Malaysian ringgit sank. Commodities, many of which are near their lowest levels since the financial crisis, also bounced back, with oil and copper futures trading higher.