Europe equities rally as China avoids meltdown

European stock markets pushed sharply higher yesterday, building on Asian gains after Shanghai avoided a sharp selloff on its return from holidays and banks were buoyed by HSBC’s decision to stay in London.
London closed 2% higher, with Frankfurt and Paris up around 3%.
The mood on markets brightened as Japanese investors shrugged off an economic contraction to propel Tokyo stocks more than 7% yesterday, leading an Asia recovery after last week’s horror show.
Shanghai fell 0.6%, but losses were modest considering traders were playing catch-up with last week’s bloodbath across world stock markets.
“No severe selloff in Chinese markets, after a week’s holiday, has allowed London-listed financial stocks to break out of the doghouse and lead the FTSE higher, buoyed by HSBC’s decision to stay in the City,” CMC Markets analyst Jasper Lawler told AFP.
Markets had jumped higher last Friday, ending a brutal week on a positive note following solid US and German economic data and an increase in oil prices.
Trading in the European afternoon session was dominated by comments by European Central Bank chief Mario Draghi as US markets were closed for the Presidents Day holiday.
Draghi said the ECB “will not hesitate to act” if needed to stimulate the economy and push up inflation in the eurozone at its next monetary policy meeting in March.
While that helped European equities maintain their gains, the euro seemed to take Draghi’s words as a statement of intent, the currency tumbling just shy of 1% against the dollar” said Spreadex analyst Connor Campbell.
Asia-focused banking titan HSBC saw its share price rise 1.4% to 446.40 pence in London yesterday, as investors welcomed news it would keep its headquarters in the British capital.
The lender’s Hong Kong-listed stock meanwhile rallied more than four%.
The news also lifted other banking stocks in London, with Lloyds Banking Group up 2.3% and Royal Bank of Scotland adding 2.6%.
“HSBC’s decision to keep its headquarters in London is a fillip for the City and the Treasury,” said Russ Mould, investment director at trading firm AJ Bell. “The government will be relieved that HSBC’s board decided unanimously to stay in the UK.”
Asian markets enjoyed a broadly healthy start to the week, but another poor trade report reinforced fears over China’s outlook.
Experts warned the gains were unlikely to be sustained for a long period, with the concerns that have wiped trillions off markets already this year—including the weak global economy and China’s slowdown—still unresolved.
Tokyo soared 7.2% by the close after losses of more than 11% last week that were fuelled by a surging yen as dealers fled into safe-haven investments.
News that the Japanese economy shrank in the final quarter of last year — while dealing another blow to Prime Minister Shinzo Abe’s attempts to kickstart growth — fanned calls for the nation’s central bank to further ease monetary policy.
Mike van Dulken, analyst at Accendo Markets, said sentiment was buoyed yesterday by “hopes that the recent banks-led global market rout was overdone and more stimulus was primed after poor Chinese trade data and Japanese GDP and industrial production.”