Global stocks, dollar rebound but China smashed again

LONDON – Volatile global markets got some respite from the latest blood-letting on Tuesday as bargain hunters nudged up Asian and European stocks, though China, at the center of the rout, was smashed again.

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The dollar and oil prices saw their first rises in five days and some of the positions in safe-haven bonds and currencies such as the yen and the euro were also cut as investors nervously dipped their toes back in the still choppy waters.

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China’s main equity markets had seen another huge 8 percent drop overnight and Japan’s Nikkei .N225 had slumped 4 percent, but the rest of Asia had been calmer overall.

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Europe also started on a firmer footing after Monday’s global beating had wiped around 450 billion euros ($520.70 billion) off the value of its leading stock markets.

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The pan-European FTSEurofirst 300 index .FTEU3 clawed back 1.7 percent of the more than 5 percent it had lost as London .FTSE, Paris .FCHI and Frankfurt .GDAXI bounced 1.5-1.7 percent.

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“We are seeing signs of relief with European stocks opening higher despite China extending its losses,” said Piotr Matys, an emerging markets expert at Rabobank in London.

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“We are trying to decouple but I think it’s too early to declare the worst is over though and we are out of the woods. The way I see it is that this is a bit of a technical correction after things got a bit oversold.”

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The currency market was also calmer. The dollar rose against the yen as it pulled out of a four-day long slide that had left it at a seven-month low.

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Traders said a rise in U.S. stock index futures and a brief rebound in Japanese stocks had helped spur dollar-buying against the yen earlier in the day, with the dollar rising to 120.11 yen at one point.

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German Bund DE10YT=TWEB and other euro zone government bond yields also rose along with those on U.S. Treasuries US10YT=RR as the previous day’s rush for safety eased, although it was far from plain sailing.

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Mainland Chinese shares had another calamitous day, with the Shanghai Composite Index .SSEC falling another 8 percent and breaking below the psychological level of 3,000. The index fell 15 percent the previous three days, including an 8.5 percent collapse on Monday.

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“Global investors are cannibalizing each other. Calling it a market disaster is not an overstatement,” said Zhou Lin, an analyst at Huatai Securities.

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“The mood of panic is dominating the market … And I don’t see any signs of meaningful government intervention.”

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Oil prices also stabilized, however, after plunging more than 6 percent and hitting 6 1/2-year lows.

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U.S. crude futures CLc1 traded at $38.73 per barrel, up 1.2 percent on the day, while Brent crude futures last stood at $43.03 after having fallen to $42.23 on Monday. Copper nudged up a fraction too to $4,956 a tonne. – Reuters

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