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China stocks surge but renewed expectations of Fed rate hike weigh on global markets elsewhere

SEOUL, South Korea – Chinese stocks surged for a second day Thursday as confidence grew that stimulus measures are helping the world’s No. 2 economy to stabilize. Other global markets were mixed on renewed expectations that the Federal Reserve’s first rate hike in nearly a decade could come next month.

KEEPING SCORE: Britain’s FTSE 100 fell 0.4 per cent to 6,386.65 and Germany’s DAX dipped 0.1 per cent to 10,831.16. France’s CAC 40 was up 0.2 per cent at 4,958.16. Futures indicated that stocks on Wall Street would be stable. Dow futures were up 0.1 per cent at 17,805.00 and S&P 500 futures added 0.1 per cent to 2,096.60.

FED WATCH: Testifying before a committee of the U.S. Congress, Federal Reserve Chair Janet Yellen described the U.S. economy as “performing well” and an interest rate hike in December as a “live possibility” if the economy stays on track. Her view was echoed by another Fed policymaker later in the day. Yellen did stress that no decision has been made yet and a move in December will depend on how the economy fares between now and then.

ANALYST’S TAKE: “Even with weak data, Fed rhetoric increasingly points toward a December lift-off,” DBS Group Research said in a daily commentary. The report said it was only a week ago when markets lowered the odds of a December rate hike due to poor data. “Markets have had to adjust expectations rapidly.”

CHINA RALLY: Chinese stocks rose as much as 3 per cent during the day before closing 1.8 per cent higher in a sign that state intervention has quelled investor fears about the stock market after a dramatic wipe-out of gains over the summer. Angus Nicholson, a market analyst at IG in Melbourne, Australia, said stability in China’s economic data, such as retail sales and manufacturing indicate Beijing’s stimulus policies are starting to have an effect in supporting growth.

ASIA’S DAY: China’s Shanghai Composite Index finished 1.8 per cent higher at 3,522.82 while Hong Kong’s Hang Seng closed flat at 23,051.04. Japan’s Nikkei 225 rose 1 per cent to 19,116.41. Australia’s S&P/ASX 200 fell 0.9 per cent to 5,193.00 and South Korea’s Kospi was down 0.2 per cent at 2,049.41. Markets in Southeast Asia were mostly lower.

ENERGY: Benchmark U.S. crude futures rebounded, adding 20 cents to $46.52 per barrel in electronic trading on the New York Mercantile Exchange. The contract slumped $1.58, or 3.3 per cent, to close at $46.32 a barrel on Wednesday as Yellen’s comments pushed up the dollar. Brent crude, which is used to price international oils, gained 33 cents to $48.91 a barrel.

CURRENCIES: The euro rose slightly to $1.0871 from $1.0866 on Wednesday. The dollar strengthened to 121.83 yen from 121.51 yen.