Markets rebound from China slump, strong U.S. data helps

Thu Aug 27, 2015 4:29pm EDT
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By Sinead Carew

NEW YORK (Reuters) - Stock markets around the world rallied on Thursday, shaking off a slump related to China growth fears, as strong U.S. economic data boosted investor sentiment and crude oil rebounded sharply.

All three major U.S. indexes closed up more than 2 percent, putting them higher for the week, following share rebounds in China and Europe. Increased appetite for risk sent government bonds and the Japanese yen down Wednesday while the dollar rose.

Annual U.S. gross domestic product growth was revised to 3.7 percent from the 2.3 percent rate reported last month and last week's jobless claims fell more than expected.

"Can the U.S. economy prove the naysayers wrong? Well, so far it has been able to do that and today’s data really puts a line under that," said Peter Kenny, chief market strategist at Clearpool Group in New York.

The data came after New York Fed President William Dudley had said Wednesday that arguments for a September rate increase "seem less compelling" than only weeks ago, given the threat posed to the U.S. economy by recent market turmoil.

On top of these factors investor nerves in China and Europe were helped overnight by Wall Street's Wednesday rally, as well as strong lending data from Europe, according to John Canally, Chief Economic Strategist for LPL Financial.

"People are just taking a second look at what caused the 10 percent correction in the first place. Not only is the Chinese market not connected to the global economy. It's not connected to the Chinese economy."

Markets around the world plunged earlier in the week as a slump in Shanghai shares fueled worries over China's economic health. While Beijing moved to ease policy late on Tuesday, stocks still ended weak that day, but Wall Street staged a strong comeback late Wednesday and its biggest daily gain in four years helped to calm investor nerves overseas.   Continued...

A man shelters under an umbrella as he walks past the London Stock Exchange in London, Britain August 24, 2015. REUTERS/Suzanne Plunkett