European stock markets rebounded strongly yesterday, shrugging off a Chinese share slide, as investors looked ahead to a key meeting of finance ministers to discuss strains in the global economy and Wall Street opened steady.
London’s benchmark FTSE 100 index led the way, rising 2.5% to close at 6,012.81 points while in the eurozone Frankfurt’s DAX 30 added 1.7% and the Paris CAC 40 advanced 2.2%.
The EURO STOXX 50 index rose 1.9% to 2,874.43
“European bourses are taking their lead from the late rally (Wednesday) on Wall Street, shrugging off a 6% slump in Chinese stocks ahead of the G20 meeting in Shanghai,” said Andy McLevey, head of dealing at stockbroker Interactive Investor.
US stocks also rose, albeit barely, after a solid showing for manufacturing orders in January with the Dow Jones Industrial Average having added 0.1% two hours into trading. The broad-market S&P 500 rose 0.5% while the tech-rich Nasdaq Composite slipped 0.2%.
As the finance chiefs of the G20 major economies were preparing to meet in Shanghai on sluggish global growth today and Saturday, fresh US data showed an encouraging 4.9% rebound in orders in the manufacturing sector in January, and new unemployment claims rose but remained in the low range of the past year.
“This morning’s (Thursday) two data releases continue the story of an economy stuck on a shallow growth trend,” said Steven Ricchiuto, chief economist at Mizuho Securities USA.
With regard to persistent spillover fears on the health of the Chinese economy, “the latest slump in Shanghai is nothing exceptional ... fears about China do appear to be fading,” Capital Economics indicated in a note, noting that recent resilience in the prices of industrial metals was an “encouraging sign that the panic over China may have peaked”.
Meanwhile oil prices, a major driver of recent market volatility, were slightly lower from Wednesday, with US benchmark West Texas Intermediate (WTI) for delivery in April down nine cents at $32.06 a barrel and Brent North Sea crude lost 18 cents to $34.23 a barrel.
The sharp decline came ahead of a meeting of finance ministers from the G20 group of leading industrialised nations in commercial hub Shanghai, with China’s slowing growth expected to loom over the high-level discussions.
US Treasury Secretary Jacob Lew has said G20 finance ministers will not deliver an “emergency response” to the market turmoil this week, as the world was not in crisis mode just yet.
But the gloomy outlook for the global economy has added to pressure on central bankers to unleash fresh monetary firepower to help stimulate growth and reassure investors.
“The economy hasn’t shown signs of stabilisation and policies are still coming out one after another,” Central China Securities analyst Zhang Gang told AFP.
Energy and materials companies had led Wall Street higher on Wednesday, as a rise in crude prices helped US stocks claw back ground from their biggest fall in two weeks.
Cooling growth in China, a key importer of raw materials, has sent commodity and energy prices spinning and saw global stocks notch one of their worst starts to a year in living memory.
Falling commodity prices have hurt exporters like Australia, whose currency slumped yesterday on news that companies are planning to invest their least in nine years.
Adding to the concerns, the International Monetary Fund on Wednesday warned that the world economy is “highly vulnerable,” and said it would likely cut its 2016 growth forecast of 3.4%.