Global shares rise as firmer Chi­nese yuan eases de­fla­tion fears

The Pak Banker - - MARKETS/SPORTS -

World stocks rose on Mon­day as China's cen­tral bank fixed the yuan at a much stronger rate and oil prices held on to re­cent gains, eas­ing fears of global de­fla­tion.

The rally be­lied a string of poor eco­nomic data from Bei­jing to Tokyo as de­mand for safe-haven as­sets waned, yet in­vestors re­mained on edge as con­cerns lin­gered about glob- al growth and the health of the fi­nan­cial sec­tor. Euro­pean stocks rose 3 per­cent .FTEU3, hav­ing shed nearly 10 per­cent over the last fort­night, fol­low­ing a sim­i­lar bounce in Asia. Fu­tures pointed to no­tional gains of more than 1 per­cent on Wall Street ESc1 but U.S. mar­kets will be closed for a hol­i­day. Mean­while, as­sets that tend to per­form well in times of stress lagged. The Ja­panese yen lost ground against the U.S. dol­lar while top-rated Ger­man bond yields pulled away from nine-month lows hit last week. "We had a very strong state­ment from the Chi­nese au­thor­i­ties sig­nal­ing they are com­mit­ted to a sta­ble cur­rency and that's helped sen­ti­ment ... safe­haven flows have un­wound some­what," said RIA Cap­i­tal Mar­kets strate­gist Nick Sta­menkovic.

In China, spot yuan jumped more than 1 per­cent to 6.4934 per dol­lar - its firmest this year - af­ter the Peo­ple's Bank of China set its daily mid­point 0.3 per­cent stronger and the head of the bank was quoted as say­ing spec­u­la­tors should not be al­lowed to dom­i­nate mar­ket sen­ti­ment.

A stronger yuan re­duces the risk that China will ex­port de­fla­tion to the world, while wor­ries about con­sumer price growth have also been helped by a surge in the oil price late last week. Brent LCOc1 and U.S. crude fu­tures CLc1 edged lower on Mon­day but held on to most of a 10 per­cent surge from Fri­day that came amid re­newed talk that the Or­ga­ni­za­tion of the Pe­tro­leum Ex­port­ing Coun­tries (OPEC) might fi­nally agree to cut out­put to re­duce a world glut. China's weak ex­ports and im­ports in Jan­uary, down 11.2 per­cent and 18.8 per­cent year-on-year re­spec­tively, seemed not to dis­turb mar­kets. The re­sult­ing jump in the coun­try's trade sur­plus to $63 bil­lion for the month might have helped, as that may of­fer sup­port to the yuan.

The dis­con­nect be­tween mar­kets and eco­nom­ics was per­haps stark­est in Ja­pan, where the Nikkei . N225 jumped more than 7 per­cent, putting its worst week since the depths of the global fi­nan­cial cri­sis in 2008 quickly be­hind it. This came de­spite data show­ing the econ­omy con­tracted by an an­nu­al­ized 1.4 per­cent in the last three months of 2015, more than ex­pected. MSCI's broad­est in­dex of Asia-Pa­cific shares out­side Ja­pan rose 2.3 per­cent . Af­ter los­ing 10 per­cent of its value so far this year. Euro­pean shares fol­lowed in their wake, led by a 3 per­cent re­bound in bank­ing stocks . SX7P on news that the Euro­pean Cen­tral Bank (ECB) is in talks to buy bun­dles of Ital­ian bad bank loans as part of its as­set-pur­chase pro­gram.

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