China, US factory data buoys stock markets

Investors worldwide have got a breather Wednesday after a week of economic woes, as both China and the United States reported better-than-expected factory data.

The China Federation of Logistics and Purchasing said that PMI, or purchasing managers' index, a major gauge of economic activity, rose to 51.7 percent in August, up 0.5 percentage points from July. The figure has greatly eased earlier fears of a precipitous decline of the world's second largest economy.

Later in the day, investors were brighten by more sound news from the United States, after the Institute for Supply Management showed American factory activity grew faster than forecast. The ISM report added fuel to a global equities rally.

The Dow Jones industrial average rose 254.75 points on Wednesday, or 2.54 percent to 10,269.47 points. The Standard & Poor's 500 index added 31 points, or 2.95 percent. The technology-heavy Nasdaq composite index gained nearly 63 points, or 2.97 percent.

Chinese analysts have been worried about a considerable slowdown in the third quarter, as Beijing has kept its rein on credit expansion to the backbone housing industry to control asset bubbles, and pivoted to draw down fiscal stimulus spending after its economy showed signs of overheating in the first quarter by roaring 11.9 percent.

August's PMI index rise reversed a four-month consecutive drop, which economists say, bodes well for China and is enough to soothe fears that the economy would slip to a “hard landing”. The index considers 50 to be a benchmark and the dividing line between economic expansion and contraction. Anything above 50 indicates expansion.

Wall Street investors jumped onto stocks, with more than six shares rising for every one that fell on the New York Stock Exchange. The best performance in two months on the Wall Street is expected to lead to a momentous rise on Thursday on the Asian markets, from Tokyo to Shanghai and Hong Kong.

The rebound in China's factory data would help prevent the world from a double-dip recession, analysts believe. They predict China's gross domestic product will rise by up to 10 percent this year.

Japanese shares opened higher on Thursday, with the Tokyo Stock Exchange's Nikkei index jumping 142.60 points or 1.60 per cent to 9,069.62 points in the first minute of trading.

By People's Daily Online