On 08 September, 2015 – European markets rallied on strong gains in Chinese equities

Most stock indices rallied Tuesday along with China’s Shanghai Composite and the Hang Seng. Investors chose to ignore the very weak Chinese merchandise trade data for August.
United States
Stocks closed sharply higher, climbing back from last week’s hefty declines as the market’s recent bout of volatility continues. The Dow Jones industrials gained 2.4%, the S&P added 2.5% and the Nasdaq was 2.7% higher. The stock market has been volatile for the past three weeks as investors are worried that China’s growth is slowing more rapidly than previously thought. Uncertainty about the outlook for interest rates in the US has unsettled investors as well.
Meredith jumped after agreeing to be acquired by fellow Media General while Teco Energy soared after agreeing to be bought by Canada’s Emera for about US$6.5 billion. General Electric advanced as did Wal-Mart Stores.
US stocks slumped last week as August payrolls data gave little guidance on interest rates. Investors remain confident the Fed will raise borrowing costs this year, even as they pare bets on the likelihood of an increase at next week’s FOMC meeting.
Gold at the afternoon London fixing was up US$1.65 to US$1,121.15. Copper futures were up 5.2% to US$2.43. WTI spot crude was down 16 US cents to US$45.89. Dated Brent spot crude was up US$1.85 to US$49.48. The US dollar was up against the yen and Swiss franc. However, it declined against the euro, pound and the Canadian and Australian dollars. The Dollar Index was down 0.3%. The yield on US Treasury 30 year bond was up 9 basis points to 2.97% while the yield on the 10 year note added 8 basis points to 2.20%.
Europe
Stocks rallied Tuesday. Investor sentiment received a boost from strong gains in the Chinese stock market. German exports also expanded more than expected in July and the Eurozone economy grew more than initially estimated in the second quarter. The FTSE was up 1.2%, the CAC gained 1.1%, the DAX jumped 1.6% and the SMI added 0.6%.
The Bank of France said industrial production and services activity are likely to continue increasing in September. The BoF continues to expect gross domestic product growth of 0.3% for the three months ending September. According to the Finance Minister, Michel Sapin, France’s economic situation has improved, but more efforts are needed for a sustained recovery and to reduce unemployment.
Commerzbank surged on a broker upgrade. Banks including Deutsche Bank, BNP Paribas and Société Générale also gained. RWE and E.ON advanced. Automakers BMW, Daimler and Volkswagen finished higher as did Renault and Peugeot. Alstom was up after the European Commission approved the proposed acquisition of its energy businesses by US-based General Electric. Amlin jumped after the specialty insurer agreed to be acquired by Japan’s MS&AD Insurance Group Holdings in a cash offer of £3.468 billion. RSA Insurance Group climbed after the company signed contracts to sell its operations in Latin America to Suramericana, the insurance subsidiary of Grupo de Inversiones Suramericana for about £403 million in cash. Miners Anglo American, Glencore, Rio Tinto and Fresnillo gained. Whitbread, which reported second quarter sales, retreated.
Eurozone second quarter GDP grew more than initially estimated as strong exports offset a decline in investment. GDP advanced 0.4% on the quarter. German exports expanded to a record high in July, led by a weak euro and suggesting that it will again be the major growth engine in the third quarter.
Asia Pacific
Stocks were mixed in this region as a strong rebound in Chinese shares helped to increase demand for riskier assets. Chinese shares rallied in the final minutes of trade on reports that the National Development and Reform Commission (NDRC) had approved two new infrastructure projects worth nearly 70 billion yuan (US$11 billion). The Shanghai Composite jumped 2.9% after a slew of support measures were unleashed by Beijing. The measures included tax exemption on dividends and a move to introduce a market-wide circuit breaker system to stabilize the market. The moves helped investors shrug off weak merchandise trade data.
China’s foreign trade worsened again in August with both exports and imports contracting on the year. Exports fell an annual 5.5% in US dollar terms after tumbling 8.3% in the previous month. Imports skidded 13.8% on the year, widening from an 8.6% decrease in the previous month. In yuan-denominated terms, exports fell 6.1% on the year and imports plummeted 14.3%. Data published by the People’s Bank of China Monday showed that China’s foreign exchange reserves fell by US$94 billion to US$3.557 trillion in August, the biggest monthly drop on record, as the PBoC stepped up its efforts to intervene in the currency market to support the renminbi amid rising capital outflows. The Hang Seng soared 3.3%.
The Nikkei went in the opposite direction, tumbling 2.4% as concerns surrounding the Chinese economy rattled investors. Investors also reacted to Japan’s revised growth numbers confirming the first decline in three quarters. Second quarter GDP was revised to a quarterly decline of 0.3%. Export oriented stocks mostly declined as the dollar weakened against the euro and the yen. Canon, Panasonic, Sony, Fast Retailing, Fanuc and Softbank retreated. Nomura Holdings declined on a brokerage downgrade.
Australian shares rallied, led by gains in energy shares after Woodside Petroleum made a nonbinding A$11.65 billion (US$8.1 billion) offer for rival Oil Search. While Woodside shares were down, Oil Search soared. The S&P/ASX was up 1.7% while the All Ordinaries was 1.6% higher. The Kospi slipped 0.2% on foreign fund selling with weak Chinese data and lingering uncertainty surrounding the timing of the Fed’s first interest rate increase weighing on the market. The Sensex rallied 1.7%.
Global Stock Market Recap

Please remember, the value of investments and the income from them can do down as well as up. Funds that invest in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can be more volatile than other overseas markets. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.
Looking forward*
The UK posts July industrial production and merchandise trade balance. The Bank of Canada announces its monetary policy decision. The US releases July JOLTS data and the second quarter services survey.
*Note — all releases are listed in local time.