Stock market surged worldwide on Tuesday and early Wednesday as Chinese shares post their strongest one-day gains since 2008s height of the financial crisis. The Japanese Nikkei rallied 7.7% in its biggest one-day climb in seven years on the heels of new corporate tax laws that see a 3.3% decrease in the corporate tax rate over the next two years. The Nikkei fell 2.4% in the previous session as it erased its yearly gain. MSCI's broadest index of Asia-Pacific shares outside Japan rose 3% with gains across all the major benchmarks. The Shanghai Composite index added 2.3% and Hong Kong's Hang Seng index rose 3.5% as the market continues to stabilize. However, trading in mainland-China shares remained at a low volume, indicating that traders remain cautious. Tuesday’s data releases revealed a bigger-than-expected retreat in import activity, creating fears that China’s slowdown may be further along than previously thought. However, this in turn led to the assumption that Beijing would offer more easing measures in the near future.
U.S. stocks also rallied as traders returned from Monday’s Labor Day holiday, posting their biggest one-day gain in two weeks as the current bout of volatility caused by uncertainty over China and U.S. interest rates continues. The Dow Jones Industrial Average rose 390.30 points, or 2.4%, to trade at 16492.68, marking the largest percentage and point-based gain since late last month when shares rebounded from a large-scale selloff. The Standard & Poor’s 500 index added 48.19 points, or 2.5% to trade at 1969.41. The Nasdaq Composite Index gained 128.01 points, or 2.7%, to trade at 4811.93. Financial markets have been swinging since China’s surprise currency devaluation in early August that led to intensified concerns over the second-largest economy’s growth projections. U.S. investors have since followed cues from the Chinese stock market as it dictated investor sentiment.
European stocks also posted strong gains on Tuesday as German imports and exports rose to record-highs in the month of July. The German DAX 30 added 2.4% to reach a weekly 3% gain. Most notably, Daimler (OTC:DDAIY) and (MILAN:BMW) added around 4% each while Commerzbank (XETRA:CBKG) rose 7.2% after being upgraded at JPMorgan (NYSE:JPM). The French CAC 40 added 2% in its second day of gains. The notable performers were carmakers Peugeot (OTC:PUGOY) and Renault (PARIS:RENA), BNP Paribas (PARIS:BNPP) and Societe Generale (PARIS:SOGN), rising between 2.3% and 3.5%. The UK’s FTSE 100 added 1.7% to post a weekly gain of 2.2%.
UK industrial production data will be released today, followed by an interest rate decision by the Bank of Canada. The Bank of England will make its interest rate decision tomorrow, followed by Eurozone inflation data on Friday.