Global stock rout eases as China breaks for holiday

The Dow Jones Industrial Average was up 1.23 per cent.
The Dow Jones Industrial Average was up 1.23 per cent.PHOTO: REUTERS

NEW YORK (BLOOMBERG) - The selloff in global stocks let up, with U.S. equities halting a two-day rout and Chinese shares finishing little changed in their last day of trading this week.

Treasuries fell and the dollar rose.

Stocks tumbled worldwide the previous two days amid revived concern that a slowdown in China will hamper growth around the globe. Equities in Shanghai erased most of a 4.7 per cent drop Wednesday, as state funds intervened to stabilize the market.

With China stepping into the background for a two-day holiday, attention is turning to Friday's U.S. payrolls report as investors gauge the strength of the world's largest economy and the timing of the Federal Reserve's next policy move.

"China's going to be closed the next few days and that means there won't be this negative lead-in to markets in the morning so that will be a nice reprieve," Stephen Carl, principal and head equity trader at Williams Capital Group LP, said by phone. "The date for a potential rate raise is certainly going back and forth and with the recent volatility in the market and situation overseas, people don't have much conviction on when it will be."

The Standard & Poor's 500 Index rose 1.2 per cent at 9:39 a.m. in New York, after a two-day rout of 3.8 per cent. The Stoxx Europe 600 Index added 0.7 per cent. West Texas Intermediate crude reversed an earlier decline and fluctuated near US$45.70 a barrel.

The Bloomberg Dollar Spot Index gained 0.3 per cent, while the yield on 10-year Treasury notes climbed three basis points to 2.18 per cent. Friday's jobs report from the world's largest economy will provide the last major data point before Fed policy makers meet on Sept. 16-17.

The ADP Research Institute said on Wednesday the U.S. added more jobs in August, though the total was less than forecast. Concern that China will curb global growth heightened Tuesday after data pointed to weakness in Europe and the slowest factory expansion in the U.S. in two years. Australia's economy expanded at half the pace forecast by analysts, a report showed on Wednesday.

"China is still making people panic," said Teis Knuthsen, chief investment officer at Saxo Bank A/S's private-banking unit in Hellerup, Denmark. "But many companies are starting to look very cheap now and the market will eventually find a support level, especially if the Fed doesn't raise rates this month."