Asia mar­kets rally af­ter strong US growth fig­ures

The Pak Banker - - INTERNATIONAL BUSINESS/SPORTS -

Asia stocks ex­tended their rally on Fri­day, tak­ing heart from strong US growth fig­ures to ce­ment a re­cov­ery af­ter a tor­rid week when global mar­kets took fright over China s gloomy eco­nomic out­look.

Tokyo led the gains, with Hong Kong and Shang­hai in tow, and oil prices zoomed higher af­ter the US re­ported a sur­pris­ingly strong new es­ti­mate of eco­nomic growth in the sec­ond quar­ter.

The latest data, which showed the world s big­gest econ­omy grew at an an­nual rate of 3.7 per­cent in the April-June quar­ter, buoyed mar­kets that have been wor­ried over the prospects for China s econ­omy, which ac­counts for some 13 per­cent of global out­put. "We end the week on another pos­i­tive note, and the crazi­ness we ve seen over the last cou­ple of weeks seems to be dis­si­pat­ing," Chris We­ston, chief mar­kets strate­gist at IG Mar­kets, said in a note.

Mar­kets across the world saw re­cov- eries, with the S&P 500 surg­ing to its sec­ond straight gain on Wall Street, while stock in­dexes in Lon­don and Paris also rose. In Asia, Tokyo closed 3.03 per­cent higher, while in af­ter­noon trad­ing, Hong Kong gained 0.51 per­cent and Shang­hai was 3.69 per­cent higher.

The gains across key Asian bourses first be­gan on Wed­nes­day, when mar­kets - - with the ex­cep­tion of Shang­hai -- be­gan to find their foot­ing. The Chi­nese mar­ket made sub­stan­tial gains the fol­low­ing day, how­ever, in­di­cat­ing prices have, for the mo­ment, found their floor.

The latest ad­vances come as a re­lief to in­vestors who at one point saw $8 tril­lion wiped off global mar­kets in a two-week stock mar­ket rout led by fears over the out­look for China. Bei­jing has sought to mit­i­gate those con­cerns in re­cent days by tak­ing a se­ries of mea­sures, from boost­ing the amount its mas­sive state pen­sion fund can in­vest in stocks, cut­ting in­ter­est rates and slash­ing the amount of money banks need to hold in re­serve.

The mea­sures are not only aimed at in­creas­ing cash flow in China, but also at re­viv­ing con­fi­dence that Bei­jing can steer the econ­omy away from a hard land­ing and keep global growth on course. Mar­kets took their lead, how­ever, from the US growth re­port, which, though it cov­ered only through June, con­firmed the econ­omy has not yet been hit much by China s down­turn. It added to other strong re­cent data on con­sumer con­fi­dence and durable goods or­ders. "The US econ­omy con­tin­ues to per­form on a con­sis­tent ba­sis... (show­ing) that its eco­nomic re­cov­ery is sus­tain­able," said FXTM chief mar­ket an­a­lyst Jameel Ah­mad.

Con­cerns in the re­cent stock mar­ket panic fo­cused on the fact that in re­cent years China has been the main driver of global growth, with Europe in the dol­drums and the United States strug­gling to main­tain a re­cov­ery. But Chris Green, an Auck­land-based strate­gist at First NZ Cap­i­tal Ltd., said the fig­ures showed the US econ­omy was in bet­ter shape.

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