Chinese growth rebound shores up global markets

Market Analyze CBS/iStockphoto

LONDON News of a rebound in China's economy shored up markets on Friday, at the end of what has been a volatile week that saw the U.S. veer dangerously close to a debt default.

Now that the U.S. Congress agreed to raise the country's borrowing limit, eliminating for now the risk of default, investors are able to focus on something other than the squabbling in Washington, a day after the S&P 500 index closed at a record high.

"The sentiment in the market today is one of mild relief and back to business as usual," said David White, a trader at Spreadex.

China's economic rebound in the third quarter was the main driver of sentiment on Friday. Government figures showed that the world's number 2 economy grew by an annual rate of 7.8 percent in the third quarter, up from a two-decade low of 7.5 percent during the previous three month period.

The improvement has eased fears of a deeper slowdown that could crimp the world economy and should ensure full-year growth doesn't fall below Beijing's 7.5 percent target.

"This marks the first acceleration in growth in three quarters and follows a modest increase in stimulus from the Chinese government earlier in the year," said Jane Foley, an analyst at Rabobank International.

In Europe, the FTSE 100 index of leading British shares was up 0.3 percent at 6,596 while Germany's DAX rose 0.1 percent to 8,825. The CAC-40 in France was 0.4 percent higher at 4,255.

Wall Street was poised for a solid opening, with both Dow futures and the broader S&P 500 futures up 0.2 percent. On Thursday, the S&P 500 closed at a record high of 1,733.15 after investors breathed a sigh of relief that the U.S. government cobbled together a deal to avoid a potential default.

Lawmakers reached an eleventh hour agreement late Wednesday evening to raise the $16.7 trillion debt limit. Despite the relief, investors are assessing the long-term cost of the drawn-out political battle and the likelihood of another high-stakes standoff early next year, when the short-term increase to the debt ceiling runs out.

Earlier in Asia, Hong Kong's Hang Seng closed up 1.1 percent at 23,340.10 and China's Shanghai Composite Index added 0.4 percent to 2,193.78. Australia's S&P/ASX 200 rose 0.7 percent to 5,321.50. Japan's Nikkei 225 bucked the trend, dropping 0.2 percent to 14,561.54. Markets in India and Southeast Asia rose.

Elsewhere, the dollar selling that marked much of Thursday's trading eased. The euro was up 0.1 percent at $1.3688, just shy of its earlier 8-1/2 month high of $1.3694. The dollar was 0.2 percent lower at 97.79 yen.

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