China stock turnaround gives a small lift to risk trades

Best day for Chinese stocks since May 2016

If the Shanghai Composite can hold onto today’s 3.3% gain, it will be the best day in more than two years.

The index is up 7.6% from Friday’s lows after leaders signaled support for non-state companies. There’s also increasing speculation about stimulus after the weekend tax plan was revealed to be more wide-ranging than expected.

The broader market hasn’t adopted a similar tone with S&P 500 futures still down 14 points but FX is beginning to look more constructive. USD/JPY is up to 112.54 after falling as low as 112.35. The kiwi has also erased 30 pips of early losses and is almost back to flat on the day.

It’s been a rough road for Chinese stocks but this is an impressive two-day turnaround.


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