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Battered Chinese stocks leapt to their largest one-day gain in two years on Tuesday and the yuan rose on a slew of signals that authorities are strengthening their resolve to support slumping markets. The yuan, which has been underpinned by firmer-than-expected central bank guidance in recent days, was also on the rise, lifting from Monday's three-week low to 7.1865 per dollar.
World markets found their footing again on Tuesday as China's panicky markets staged a sharp rally on reports the government may intervene directly and on a levelling off in U.S. Treasury yields after their jobs-inspired bounceback this week. The early action was all in China however, where benchmark stock indexes recorded their biggest one-day jump in almost two years amid a swirl of reports about regulatory action to staunch the selling, state-sponsored purchases and rising concerns at the top of the politburo. The relentless slide in Chinese stocks, which had seen them underperform Wall St equivalents by more than 20% over the past three months alone, has snowballed amid foreign capital flight, tense geopolitics and deepening domestic deflation due to a property bust the government is struggling to stabilise.
All eyes - not least those of policymakers in Beijing - will laser in on Chinese stocks on Wednesday to see if they can continue their surge higher on the latest wave of expectations that authorities will take further steps to support markets. China's big two indexes jumped more than 3% on Tuesday for their biggest gains in almost two years, although it should be remembered that only last week had sunk to five-year lows. Still, the bounce suggests that the overwhelming gloomy sentiment towards China, even if you think it is justified on a longer term fundamental basis, is probably over-cooked in the short term.
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