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European stock markets boosted by China package
European stock markets traded higher yesterday ahead of expected solid gains on Wall Street as sentiment across the world was boosted by China's $586 billion (Dh2150.6 billion) plan to stimulate its economy, a main driver of global growth.
- AP
- Published: 23:04 November 10, 2008
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Regional bourses buck the trend
Regional bourses buck the trend
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China effect ignites Indian share rally
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Markets rise after China's $586b plan
Asian markets rise after China announces $586b stimulus plan
London: European stock markets traded higher on Monday ahead of expected solid gains on Wall Street as sentiment across the world was boosted by China's $586 billion (Dh2150.6 billion) plan to stimulate its economy, a main driver of global growth.
The FTSE 100 index of leading British shares was up 120.33 points, or 2.8 per cent, at 4,485.29, while Germany's DAX was 145.01 points, or 2.9 per cent, higher at 5,083.47.
France's CAC-40 was 108.78 points, or 3.1 per cent, higher at 3,577.90.
Europe's gains follow across the board increases in Asia.
Tokyo's Nikkei 225 stock average surged 498.43 points, or 5.8 per cent, to 9,081.43, while Hong Kong's Hang Seng Index gained 501.20 points, or 3.5 per cent, to 14,744.63.
In mainland China, where the benchmark Shanghai Composite Index has fallen by more than two-thirds since peaking October, the index soared 7.3 per cent to 1,874.80. Markets in India, Australia, Singapore and South Korea joined the region's advance.
Wall Street was expected to open higher shortly following Friday's 250 point increase, with Dow futures up 184, or 2.7 per cent, at 9,180.
Stimulus package
The global gains come in the wake of Chinese government's unveiling of a massive $586 billion stimulus package to help stave off much of the economic slowdown. The package involves a mix of spending, subsidies, looser credit policies and tax cuts.
China's economic growth slowed to 9 per cent in the third quarter, the lowest level in five years and a sharp decline from 11.9 per cent the year before - perilously low for a government that needs to create jobs for millions of new workers and for other Asian countries that have come to depend heavily on Chinese demand.
China's announcement came as economic officials from 20 leading nations called Sunday for increased government spending to boost the troubled global economy.
At a meeting in Brazil, finance ministers and central bank presidents from the Group of 20, which includes major wealthy and developing nations, also said emerging economies deserve a prominent role in talks to overhaul the world financial system.
Britain is also expected to unveil a fiscal package this month, while President-elect Barack Obama has indicated that new stimulus measure will be announced soon after he moves into the White House in January.
"While global economic difficulties remain, there's looking like there's a bit of a 'joined-up' approach from governments around the world and China's plan may well help cushion the blow," said Richard Hunter, strategist at Hargreaves Lansdown stockbrokers in London. Hunter also said markets may be pricing in the possibility that the economic slowdown around the world may not last as long as previously predicted if governments do loosen their fiscal pursestrings. Markets historically, he added, historically recovery 6-12 months before the actual economy starts growing.
Higher demand
One of the main outcomes from China's announcement was a rally in commodity and energy prices as traders priced in the likelihood of higher global demand. Oil prices, for example, were $4.05 a barrel to $65.09. The contract settled at $61.04, up 27 cents, in Friday trade on the New York Mercantile Exchange.
As a result, a number of mining and oil stocks, such PLC, Total SA and Royal Dutch Shell posted strong share price gains yesterday.
Though the markets are welcoming government attempts to shore up global economic growth, upcoming data releases around the world are likely to continue to paint a very gloomy picture.
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