European shares bounced back on Tuesday after a rally in mining and telecom stocks and some stabilization in Chinese markets, a day after poor Chinese factory data triggered a sharp sell-off that hit world markets.
Chinese regulators leapt to support the country’s stock markets early on Tuesday, with the central bank pouring cash into the money market system and the securities regulator suggesting it might restrict share sales by major shareholders, Reuters reported.
The securities regulator defended the functioning of the new “circuit breaker” policy that caused Chinese stock markets to suspend trade on Monday after markets fell 7%, triggering the mechanism on the very first day it came into effect.
The CSI300 index of the largest listed companies in Shanghai and Shenzhen closed 0.3% higher on Tuesday.
“Chinese markets managed to stabilize on hopes that the central bank and the authorities will take measures to support economic growth. And they have quite a bit of weaponry in their arsenal like lowering the reserve requirements and cutting interest rates,” Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, said.
Gijsels said the market was also getting support from the telecom sector, which has seen several mergers and acquisitions.
“More deals are likely to come as companies look for synergies and cost efficiencies. This is an additional bonus for a relatively defensive sector in the current market environment.”
Telecoms stocks outperformed, after telecom operator Orange confirmed it was in renewed preliminary talks about a merger with rival Bouygues Telecom. Bouygues rose 2.7%, Altice climbed 3% and Numericable surged 5.7%. Orange was also up 1.7%.
The pan-European FTSEurofirst 300 index was up 0.6% at 1,409.81 points after falling 2.5% on Monday, its biggest one-day drop since early December.
The STOXX Europe 600 Basic Resources index jumped 2.3%, the top sectoral gainer, as prices of key industrial metals rose 1.1 to 1.6% after slumping in the previous session. Anglo American, BHP Billiton and Glencore rose 2.7 to 3.1%.
However, British clothing retailer Next fell 3% after saying its sales performance in the run-up to Christmas was disappointing. It blamed unusually warm weather in November and December, poor stock availability and increased online competition.
