Volatility to persist in world stocks despite relief triggered by Chinese trade data

Dubai: Volaility is likely to persist in coming weeks and months in world equities even as China’s better than expected trade data triggered a rebound across markets along with crude oil, which rose more than 2 per cent, on Wednesday.

EURO STOXX 50 was 1.49 per cent higher at 3,110.20, extending gains from the previous session, while German DAX index was 1.08 per cent higher at 10,093.54. FTSE 100 index was also up 1.11 per cent higher at 5,995.09. In Asia, Japan’s Nikkei index closed 2.88 per cent higher at 17,715.63, while China’s main gauge the Shanghai Composite Index closed 2.42 per cent lower. US futures also rose close to a per cent in trade.

“We are seeing a reversal of the previous days weakness primarily driven by the better than expected China data and stabilising CNY after the government put in place measures to penalise speculative short positions. Stronger oil prices on stronger Chinese import data and short covering ahead of US inventory report also supporting the improved sentiment,” said Ole Hansen, an analyst at Saxo Bank.

Global equities witnessed a volatile start to 2016, driven by worries over conflict in the Middle East, China’s finances and the fallout from low oil prices.

“Equity markets around the world ended their first trading days in clearly negative territory never seen before due to the Chinese ‘circuit breaker’ accident and RMB depreciation. Our view is that the investment year 2016 will become a quite challenging one. Currently the most likely outcome remains a muted full-year performance with big swings in between. For the time being we would not recommend to bottom-fish,” Heinz Rüttimann, Strategy Research Emerging Markets & Next Generation, at Julius Baer told Gulf News.

But, more stability in China would also leave the way clearer for the US Federal Reserve to raise interest rates this year and the brighter tone drove the dollar about half a per cent higher to 118.16 yen and up a third of cent against the euro.

Iran, oil

Brent crude also jumped more than 2 per cent in trade, while WTI recovered after it slipped below the keenly watched $30 (Dh110) per barrel mark in late trade on Tuesday. From now, traders would be closely watching out for the quantum of supplies from Iran, which would be off sanctions from Monday, to gauge the supply glut in the market.

“The news on Iran has been going around the market the last week so limited impact as the market is already pricing in a relative quick increase of 300,000 to 500,000 barrels of oil per day from Iran,” said Saxo Bank’s Hansen.

The nuclear deal agreed between Iran and world powers may be implemented by the time markets open on Monday, triggering sanctions relief for the Islamic republic that will unlock billions of dollars in frozen accounts and pave the way for a surge in oil exports.