Asian markets rose on Tuesday, with Chinese stocks jumping by the most in two months after weaker than expected economic data raised the prospect of additional stimulus by the People’s Bank of China.
The Shanghai Composite Index rose 93.90 points or 3.2% to 3,007.74, trimming its year-to-date loss to 15%. The CSI 300 Index of the largest companies listed in Shanghai and Shenzhen climbed 92.40 points or 3% points to 3,223.13.
Hong Kong’s Hang Seng Index also rallied nearly 400 points or 2.1%.
Japanese stocks traded mostly higher on Tuesday, with the Nikkei 225 Index adding 0.6%.
Economic data on Tuesday showed that China’s economy in 2015 expanded at the slowest pace in 25 years, raising expectations for increased stimulus by the People’s Bank of China.
China gross domestic product (GDP) – the value of all goods and services produced in the economy – grew 6.8% in the three months to December, the National Bureau of Statistics reported on Tuesday. That was the slowest quarterly expansion since 2009.
Full-year growth was 6.9%, slightly below Beijing’s target of 7%. Growth had slowed to 7.3% in 2014.
Separate economic indicators also showed a slowdown in December industrial production, retail sales and urban investment, fueling fresh concerns about the health of the world’s second-largest economy.
It’s unclear how the PBOC will respond to the latest data. The central bank has intervened numerous times over the past 12 months to bolster the economy and stabilize the financial market. However, policymakers have given very mixed signals over the past seven months by allowing the yuan to weaken sharply then intervening to limit its decline.
Investors are monitoring developments in China very closely, as financial turmoil in that country has been largely to blame for the massive retreat in global equities since the start of the year.
European stocks on Tuesday responded positively to increased stimulus bets, with the Euro Stoxx 50 climbing 2%.
American stock futures also rose sharply ahead of Tuesday’s opening bell, with the Dow Jones climbing 181 points. Wall Street was closed on Monday for Martin Luther King Jr. Day.
In commodities, oil prices steadied above $29 a barrel on Tuesday, although the outlook remains bleak. China’s economic slowdown will continue to underpin weak demand in a global market that is well supplied. Investors are concerned that the lifting of US-led sanctions on Iran can worsen the supply glut. Tehran is prepared to introduce an extra 500,000 barrels of crude back to the market.
Based out of Toronto, Canada, Husni Sam Borji is senior macroeconomics analysts who contributes regularly to TradersDNA, where he examines the global financial markets. Husni Sam has authored dozens of government reports and industry whitepapers, as well as thousands of financial articles. Husni Sam holds a BA from the University of Windsor and a Master’s degree in Economic Public Policy from McMaster University.
His expertise includes macroeconomics, fundamental analysis, industry research and global political economy.