U.S. Stocks Open Higher as Chinese Shares Rebound
October 19 2018 - 10:42AM
Dow Jones News
By Will Horner and Corrie Driebusch
U.S. stocks rose Friday as a rare intervention by Chinese
regulators calmed investors following disappointing economic data
on China growth.
The Dow Jones Industrial Average rose 206 points, or 0.8%, to
25586 in recent trading, a bounceback that put the index on track
for weekly gains after a bruising day Thursday. The S&P 500
added 0.96% while the Nasdaq Composite gained 1.2%.
The gains came on the heels of an eventful trading session in
Asia. The Shanghai Composite initially fell after data showed
China's third-quarter gross domestic product was the weakest since
the global financial crisis. Throughout the day, China's economic
czar, central-bank governor and banking and securities regulators
all came out calling for confidence in China's economic outlook.
Shares rallied, with Shenzhen A Shares and the Shanghai Composite
both up 2.6% after the intervention.
In the U.S., stocks were lifted in part by some positive
earnings reports.
Shares in PayPal jumped 11% after the company boosted its
outlook for the fourth quarter. Meanwhile, Procter & Gamble
reported its strongest quarterly sales growth in five years, and
shares rose 6.4%.
"Investors are faced with the good, the bad, and the ugly," said
Katie Nixon, chief investment officer of Northern Trust Wealth
Management, referring to the recent swings in major U.S. stock
indexes. "On the good front, we've had some very good momentum on
earnings." The bad, however, is rising interest rates, she said,
and the ugly includes heightening trade tensions with China, which
has the potential to further rattle markets around the globe.
Indeed, investors in Asia are still nervous of the brewing trade
war between the U.S. and China and the yuan's steady depreciation,
said Sophie Huynh, cross-asset strategist at Société Générale , but
she added that looking ahead, Chinese equities still have something
to offer.
"We think that China is a medium-term bullish story and we would
keep Chinese assets in portfolios," Ms. Huynh said.
European stocks slipped Friday, with Italian assets under
pressure, dragged down by a simmering confrontation between Italy
and the European Union over the nation's proposed budget.
The Stoxx Europe 600 added 0.1%, dragged lower by European tire
manufacturers who were hit hard after Michelin lowered its outlook
for the year and warned that a decline in European and Chinese
sales was set to continue into the fourth quarter.
Shares in the French tire-maker fell 8%, while shares in its
German counterpart Continental were also dragged down by the
warning, falling nearly 5%.
Overvalued equity markets coupled with trade war fears, rising
oil prices and concerns over future U.S. monetary policy were
prompting a selloff, said Peter Dixon, global financial economist
at Commerzbank.
"Under those circumstances, I think if we saw one of the
dominoes fall, one of the markets tip over, then there are fears of
contagion," he said.
In Europe, the clash between Italy's populist coalition
government and the European Commission continued to spook
investors. The two parties are at odds over Italy's proposed
budget.
In a letter published Thursday, the European Commission said
Italy's spending plans were "unprecedented" and a "serious
concern."
The Italian FTSE MIB was down 0.83%. The yield on the Italian
10-year note was up around 0.1% at 3.75%, according to Tradeweb.
Yields move inversely to prices.
Write to Corrie Driebusch at corrie.driebusch@wsj.com
(END) Dow Jones Newswires
October 19, 2018 10:27 ET (14:27 GMT)
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