Strong eurozone figures rally global markets after China gloom
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Version 0 of 1. Global markets yesterday shrugged off a big fall in China’s monthly imports after figures showed the eurozone economy strengthened this year. Related: Markets rally on stimulus hopes after Chinese imports slump - as it happened The better than expected figures for the 19-member currency bloc sent the FTSE 100 up 71 points to 6,146 while the New York Dow Jones index soared almost 300 points by 6pm UK time on Tuesday. Germany, the eurozone’s largest economy, was also its strongest performer after an improved picture for GDP growth was bettered by record high imports and exports in July. “The German data is offering some relief that the European recovery remains on track and German exports are not impacted too much by the emerging market turmoil,” said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets. Only the Japanese nikkei was a faller among major exchanges, slipping 2.43%, as traders feared the China slowdown would take a heavy toll on Tokyo’s export industries. The price of oil moved higher in tandem with metals prices, though remained well below prices achieved before a stream of negative figures from China sent world markets into a spin. Figures from Goldman Sachs showed that some of the stability achieved in the subsequent months came from the 1.5tn yuan (£172bn) buying spree by Beijing, much of it on smaller company shares. The Chinese authorities spent about 600bn yuan in August alone. Beijing has also imposed a raft of measures to prevent excessive speculation by individual traders, acting on their own behalf, who dominate the Shanghai market. In a signal that regulators believe more needs to be done, they said a “circuit breaker” mechanism, which would kick in to stop wild swings on its turbulent stock markets, was close to being implemented. Related: China plans stock market 'circuit breaker' to curb volatility According to draft regulation, trading would be suspended for 30 minutes if the market rose or fell by 5%. If the index went up or down by 7% or more, trading would be suspended for the day. The mechanism could only be triggered once a day. “Circuit breaker in both directions will be conducive to curbing excessive transactions and reining in market fluctuations,” the draft from the securities regulator said. China’s foreign trade dropped 9.7% in August, with customs data showing that exports for August were down 6.1% but imports fell 14.3%. The figures, which follow a similar slump in July, raised more questions about the pace at which the world’s second-biggest economy was slowing and added to concerns about its contribution to global growth. In the first eight months of this year, imports were down 14.6% and exports fell 1.6%. However, Chinese stocks rose as some analysts calculated the data could lead to further policy easing in the coming months. Shanghai’s composite index recovered from a poor start and finished up almost 3%. Eurozone GDP growth, which has suffered a series of setbacks since the financial crash, grew in the second quarter after it was adjusted upwards to 0.4% from 0.3%. The first quarter was revised from 0.4% to 0.52%.Analysis of the figures showed that improvement was due to a surge in exports, which was driven by the falling value of the euro against the dollar and contributed a 0.3-point increase to quarterly growth. Germany’s trade was 2.4% higher at €103bn (£75bn) adding another €25bn to the country’s trade surplus, a record high. The ING economist, Carsten Brzeski, said the weak euro helped boost exports, especially to the US, which became Germany’s single most important trading partner in the first half. There was also a silver lining to the disappointing Chinese import data for August, as some analysts saw it as a sign that China’s authorities would do more to support the economy. “(There is some) hope that you’ve got a lot more stimulus on the way from China,” said Chris Beauchamp, market analyst at IG. Alongside the billions of yuan Beijing has thrown at its stock market to prevent a further collapse, the People’s Bank of China has spent huge sums from its foreign exchange reserves, the world’s largest, propping up the currency following a surprise currency devaluation. According to figures released earlier this week, the bank’s reserves dropped by almost $94bn (£61bn) in August to $3.5tn. Additional reporting by Luna Lin |