World Economy

Global Stocks Climb

Global Stocks ClimbGlobal Stocks Climb

Global stock markets surged on renewed confidence in the US recovery after days of wild swings, but some observers warned of more turbulence to come over the slowing Chinese economy.

Buyers streamed back to markets after Shanghai, the epicenter of the volatility, snapped a five-day losing streak, and a surprisingly strong new estimate of US economic growth in the second quarter–3.7%–gave more support as the day passed, AFP reported.

That, and a production stoppage by Shell in Nigeria, sent oil prices zooming up 10%, their biggest single-day jump since the 2009 global economic crisis.

“The US economy continues to perform on a consistent basis... (showing) that its economic recovery is sustainable,” FXTM chief market analyst Jameel Ahmad said on Thursday.

But none of that cleared up questions about China’s economic slowdown and the impact of Beijing’s efforts to shore up growth.

Economists remained worried that a stall in the growth of the world’s second largest economy will drag down other emerging markets and in turn hit the leading powers, including Japan, Europe and the United States.

The moves by the Chinese government are “not as effective as they used to be,” said Yale University finance professor Chen Zhiwu on a conference call with the council on foreign relations.

Willem Butler, global chief economist at Citigroup, is skeptical China will take the necessary steps to boost growth, such as engineering a stimulus program to encourage badly needed consumption.

China said Sunday that its massive state pension fund will be allowed to invest up to 30% of assets in stocks.

In any case, the momentary appearance of a floor to the losses on China’s markets spilled across the rest of the globe. London gained 3.56% and Paris 3.49%; shares in two threatened major emerging markets, India and Brazil, reversed course and headed higher; and Wall Street wrapped up the day with the S&P 500 surging 2.43%, its second straight gain.

Tokyo stocks jumped 2.4% at the open on Friday, continuing the trend.

Some US market watchers were ready to look past the upheaval of the last two weeks or so, which has shaved an estimated $8 trillion off world markets.

Eyes were turning toward the central banking symposium that the US Federal Reserve was hosting in Jackson Hole, Wyoming from Thursday to Saturday.