World stocks rally on China stimulus

A woman walks past an electronic stock indicator of a securities firm in Tokyo. AP FILE

LONDON, United Kingdom — World stock markets rose Tuesday, buoyed by upbeat manufacturing data in the US and hopes for the Chinese economy after fresh stimulus by China’s central bank, analysts said.

In Europe, Frankfurt’s DAX 30 index kicked off the new month with an upswing of more than two percent as investors eyed possible fresh support from the European Central Bank (ECB) next week and official data showed German unemployment remained at historic lows in February.

Its Paris and London counterparts lagged but still finished the session higher, passing the baton to Wall Street which opened firmer too, driven by solid auto sales reports for Ford and Fiat Chrysler in February.

“Domestic stocks are gaining solid ground, following a positive session in Asia and gains for the European markets, with upbeat US and eurozone manufacturing reports more than offsetting another sign of slowing growth in China,” analysts Charles Schwab said in a note to investors.

READ: China manufacturing activity shrinks at fastest in 4 years–govt | Lawmaker suggests PH economic sanctions against China

Although US manufacturing activity contracted for the fifth straight month in February, many sectors reported good demand domestically, the Institute for Supply Management (ISM) reported.

The ISM purchasing managers index for the manufacturing sector registered 49.5, below the threshold of 50 between growth and contraction.

But it was better than January’s level, and the best since September.

Markets also were boosted by merger talk, according to analysts.

US-based global markets operator Intercontinental Exchange said it was mulling a bid for the London Stock Exchange Group, already in merger talks with Germany’s Deutsche Boerse, operator of the Frankfurt market.

ICE, which owns the New York Stock Exchange, said in a statement that it was “considering making an offer for LSEG”, which owns the London and Milan stock exchanges.

The announcement helped counter disappointment among some investors over beleaguered British lender Barclays’ results for last year after it said that net losses had more than doubled and unveiled a further shake-up as it seeks to struggle from several scandals.

China, though, was the key driver behind higher markets after its central bank cut the amount of reserves banks must set aside in Beijing’s latest attempt at tackling the country’s slowing growth.

After Chinese markets closed Monday, policymakers cut the “reserve requirement ratio” for financial institutions — the share of deposits that they must have available in cash — by 0.50 percentage points, freeing up more funds for them to lend.

The announcement boosted the mood across Asian trading floors, with Shanghai jumping 1.7 percent and Tokyo reversing early losses to close up 0.4 percent Tuesday.

“The major indices across Asia managed to post some fairly solid gains, helping Europe to lift its positive start to the week and push the major European stock markets towards monthly highs,” said James Hughes, chief market analyst at traders GKFX.

China’s central bank move came after a G20 finance ministers’ weekend meeting in Shanghai that stressed the use of all available policy tools to boost growth and settle wild volatility on global equity markets.

It helped to offset more weak Chinese manufacturing figures. Official data Tuesday showed that February activity shrank at its fastest rate in four years.

India’s main stocks index meanwhile posted its biggest rise since Prime Minister Narendra Modi came to power almost two years ago, after the government presented a budget expected to boost rural demand.

At one point the index was up 3.5 percent before closing 3.4-percent higher.

Key figures around 1730 GMT

London – FTSE 100: UP 0.92 percent at 6,152.88 points (close)

Frankfurt – DAX 30: UP 2.34 percent at 9,717.16 points (close)

Paris – CAC 40: UP 1.22 percent at 4,406.84 points (close)

EURO STOXX 50: UP 1.72 percent at 2,996.39 points

Tokyo – Nikkei 225: UP 0.37 percent at 16,085.51 (close)

Shanghai – composite: UP 1.68 percent at 2,733.17 (close)

Hong Kong – Hang Seng: UP 1.58 percent at 19,413.19 (close)

New York – Dow: UP 1.64 percent at 16,787.93 points

Euro/dollar: DOWN at $1.0841 from $1.0876 on Monday

Dollar/yen: UP at 113.98 yen from 112.72 yen