Chinese stocks volatile a day after abrupt sell-off

Global equity markets regained poise on Friday with China scrapping its four-day-old circuit-breaker system, which analysts said exacerbated market sell0ff than limiting volatility.

The benchmark Shanghai Composite Index suffered a 10 percent loss this week, with market shutdowns on Monday and Thursday triggered by the circuit breaker mechanism. China is rebalancing its economy, shifting it away from a model of debt-fuelled infrastructure and low-cost exports towards lower but more sustainable growth, driven instead by domestic consumption and services.

The weaker Chinese currency was spooking investors, as it suggests the Chinese economy is weaker than believed as authorities take bold steps to jumpstart slowing growth.

The pan-European FTSEurofirst 300 index and the eurozone’s blue-chip Euro STOXX 50 index were down 2.4 per cent and 1.8 per cent respectively.

In Dublin, the ISEQ index ended broadly unchanged yesterday, but it has lost more than 3.3 per cent in the first week of the year, a drop of more than €2.9 billion in value, as investors in Irish stocks reacted to global trends.

News came this morning that China’s stock markets stabilized somewhat on Friday, with a 2 percent increase across the board.

What’s going to happen with the stock market in China remains to be seen, but after a short rebound on Friday, it seems as if things may have settled down. Key indices in Asia, including China, Hong Kong, Singapore, South Korea and Taiwan moved up between 0.59% and 1.97%, while Japan moved down by 0.39%.

China’s state Xinhua news agency has the details of decisions taken by the CSRC to stabilise stock market conditions.

This Friday, the currency’s midpoint was set higher and that brought relief to investors, who see this as a sign that China won’t allow the yuan to depreciate too quickly.

The US Labor Department also reported Friday that job creation for the previous two months was also significantly stronger than originally reported, and more people were in the jobs market. Economists have said that further declines in the yuan could trigger further capital flight from China and set off competitive currency devaluations in other countries.

OIL: In energy trading, USA crude sank Thursday to its lowest level in 12 years on fears Chinese demand might weaken. The benchmark US rebounded moderately in Asian daytime hours, rising 67 cents to $33.94 in electronic trading on the New York Mercantile Exchange.

The plunge in China Thursday started a global stock rout that sent the Dow tumbling nearly 400 points and thrust the Nasdaq back into correction territory.

Brent crude, used to price worldwide oils, rose 70 cents to $34.45 a barrel in London.

The eight days of falls revived concerns over the currency of the world’s biggest trader in goods.