World stocks recover after China scraps circuit breaker

RSTV Bureau

market_shareOn Friday, world markets recovered because Chinese stocks ended the day 2 per cent up after China decided to do away with the recently implemented circuit breakers.

Other Asian markets including India, ended in the green after China removed trading curbs. European markets including London’s FTSE 100 and Frankfurt’s DAX 30 too rebounded modestly.

Oil markets also pulled back after hitting a 12-year low on Thursday.

China induced volatility has also overshadowed US employment report.

“It takes quite something to relegate the US employment report to a footnote in this week’s trading activity, but the China induced volatility seen over the past few days appears to have done the trick,” said Michael Hewson, chief market analyst at CMC Markets UK.

On Thursday, Shanghai slumped a whopping 7.32 per cent in the first half hour of trading after which trading was stopped as the circuit breakers came into place. Circuit breakers came into effect twice in this week when Shanghai fell by over 7 per cent.

The mechanism follows the Hushen 300 Index, which reflects the performance of bluechips listed in Shanghai and Shenzhen. When the index rises or falls by 5 per cent, the circuit breaker imposes a 15-minute suspension in trading. If the Hushen 300 declines by over 7 per cent, trading is halted for the day.

The stock market “circuit breaker” was put into effect at the beginning of the year as part of efforts to reduce volatility on Chinese stocks which plummeted in mid-2015, sending jitters through world markets.

Reports said that Chinese stocks improved on Friday because Shanghai was given support by state-backed cash being used to prop up big-ticket firms.
Global investors have been alarmed by slowing growth in China’s economy, which is expected to have expanded in 2015 at its slowest pace in a quarter of a century.

(With inputs from agencies)