China intervention soothes US, European stocks

[NEW YORK] US and European stocks stabilised on Tuesday after Beijing pumped cash into the money market to soothe worries over the slowing Chinese economy.

Markets in London, Frankfurt and Paris all finished with modest gains, along with the S&P 500 in the US.

The advance was a reversal from Monday's bruising open to the 2016 trading year, when a deep decline in Chinese stocks prompted a global stock sell-off. Markets had also been rattled by rising tensions between Saudi Arabia and Iran over the Saudi execution of a prominent Iran-backed Shiite cleric.

On Tuesday, the benchmark Shanghai Composite Index ended down 0.3 per cent after the People's Bank of China pumped 130 billion yuan (S$28.5 billion) into the money market. News reports also said state-controlled funds bought stocks.

Investors are trying to ascertain whether China and the Saudi-Iran rift "should be something that we should worry about for much of this year, or whether it was simply an opening day flash in the pan," said Sam Stovall, chief investment strategist at S&P Capital IQ.

"It's still unresolved." Some analysts suggested that the turbulence that afflicted Chinese equities on Monday had not yet run its course.

"It's an unstable situation when local investors are selling to a government buyer, it can only last so long," said Jasper Lawler, a market analyst at CMC Markets UK.

"There are still worries about the stability of the Chinese economy and the ability of the rest of the global economy to come to terms with the new China, one that no longer looks to double-digit GDP growth as the norm," said analyst James Hughes at trading firm GKFX.

"Markets have not coped well with this up to now." London finished with a gain of 0.7 per cent, while Paris and Frankfurt each rose 0.3 per cent. The S&P 500 added 0.2 per cent.

Volkswagen slumped 4.0 per cent after the US Department of Justice sued the automaker over its emissions-cheating technology. Damages could run to US$20 billion or higher.

Apple fell 2.5 per cent after Nikkei Asian Review reported that it plans to reduce production of its latest iPhone 6s models by around 30 per cent due to weak sales.

US auto giants General Motors and Ford fell 2.6 per cent and 1.8 per cent, respectively, after reporting gains of five percent for 2015. Despite the solid results, December's figures were a bit below some forecasts.

Gunmaker Smith & Wesson surged 11.1 per cent after lifting its earnings forecast following a surge in gun sales. The gains came as US President Barack Obama unveiled executive measures that will make it harder to buy and sell weapons.

AFP