Wall Street and European stocks surged Tuesday, as another sharp drop in Chinese exports fueled speculation Beijing would offer additional support to prop up the equities market.
Chinese exports declined 5.5% in August, following a decline of 8.3% the prior month, the General Administration of Customs reported. A median estimate of economists had forecast a drop of 6% from July.
Chinese exports will face “relatively big pressure” in the final quarter of the year, Customs said in a statement.
Imports plunged 13.8% last month following a decline of 8.1% in July. As a result, Beijing’s trade surplus rose to $60.24 billion from $43.03 billion.
Concerns about a weakening Chinese economy were offset by speculation that the People’s Bank of China would provide more support to prop up the financial sector and broader economy. Expectations of additional stimulus triggered a global rally in the equities market, led by China’s Shanghai Composite Index, which rose 2.9% to 3,170.45. The Shanghai Shenzhen 300 Index bounced 2.6% to 3,334.02. The Hang Seng Index in Hong Kong rose 3.3% to 21,259.04.
European stocks rose across the board, led by a 1.8% advance for Germany’s DAX Index. The FTSE 100 in London rose 1.2% and the CAC 40 in Paris climbed 1.3%. All 19 industries listed on the pan-European Stoxx 600 rose Tuesday, led by automakers.
European stocks also benefited from an upward revision to Eurozone second quarter GDP. The Eurozone economy rose 0.4% in the second quarter, up from the initial estimate of 0.3%. Gross domestic product accelerated 1.5% on the year, up from an initial estimate of 1.2%.
The broad rally also spread to Wall Street, as markets reopened following Labor Day. The Dow Jones Industrial Average was up more than 200 points in intraday trade. The S&P 500 Index was up nearly 30 points or 1.5% and the Nasdaq Composite Index had climbed nearly 80 points or 1.7%.
News of China’s fledgling export sector hit oil prices Tuesday, with West Texas Intermediate (WTI) falling $1.33 to 44.72 a barrel. After initial weakness, global benchmark Brent crude rallied 61 cents to $48.24 a barrel.
In currency news, the US dollar weakened Tuesday as investors continued to eye next week’s Federal Open Market Committee policy meetings. The dollar index, which tracks the performance of the greenback against six global rivals, fell 0.2% to 96.01.
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.