Chinese stimulus sparks global stocks rally

Fresh Chinese stimulus sparked a global stocks rally Wednesday in markets that had been coloured red by fears of a slowdown in the world's second-largest economy, with Tokyo surging almost 8 percent.

The pledge by China's finance ministry to adopt a "proactive fiscal policy ... and accelerate reforms that will help stabilise growth" gave markets a burst of confidence.

Japanese stocks spearheaded an Asian equities rally as investors scooped up shares on the cheap, with buying also boosted by a weak yen and hopes that China's wild market volatility was ending.

Tokyo's Nikkei-225 index leapt 7.71 percent or 1,343.43 points to 18,770.51 by the close.

That was the biggest one-day jump since the global financial crisis and Lehman Brothers bankruptcy of late 2008, when markets faced heavy volatility.

Wednesday's recovery came after the Nikkei tumbled 2.43 percent a day earlier, wiping out all of its gains since the start of the year, as weak China trade data aggravated worries about its economy.

The Nikkei had been up almost 20 percent on the year in late June, before tumbling as China devalued its yuan currency last month, setting off a wave of global volatility.

Hong Kong ended more than four percent higher while Shanghai and Sydney closed up more than two percent.

In European afternoon trading, London's benchmark FTSE 100 index of top companies rose 2.13 percent to 6,276.75 points.

Frankfurt's DAX 30 climbed 1.85 percent compared with Tuesday's close to 10,460.98 points and the Paris CAC 40 jumped 2.58 percent to 4,716.70.

Madrid shot up 2.96 percent and Milan by 2.13 percent.

"European markets are taking their lead from a buoyant Asian session, with stocks soaring higher and appearing to have put recent concerns behind them," said Rebecca O'Keeffe, head of investment at online stockbroker Interactive Investor.

"After weeks of subdued performance in Asia, with fears of lower Chinese growth fuelling negative sentiment, speculation that Chinese policymakers will do more and a seeming shift in investor confidence has seen the strongest rally in Asian stocks since October 2008."

Wall Street also opened higher, with the Dow Jones Industrial Average climbing 0.86 percent to 16,634.96 points.

The broad-based S&P 500 rose 0.78 percent to 1,984.75, while the tech-rich Nasdaq Composite Index gained 0.95 percent to 4,857.53.

The big gains on stock markets come after weeks of stocks being hammered by concerns about slowing growth in China, whose economy is worth more than 13 percent of global GDP.

- China news lifts mood -

The announcement by the country's finance ministry also said it would accelerate major construction projects and cut taxes for small and medium-sized enterprises to support growth.

In another positive move, media reports said that China is preparing to unveil broad reforms for state-owned companies which will see some firms shut and others introduce more diversified ownership.

The initiative, outlined in a purported official document circulating online, addresses concerns that China has slowed reforms while its economy falters and its stock market gyrates.

"The European markets got another growth injection from the Asian session ... with news from Japan and China helping to convince investors the worst may indeed be over," said Spreadex analyst Connor Campbell on Wednesday.

The finance ministry announcement "seemed to confirm the hopes of some kind of further Chinese stimulus, hopes that were ostensibly behind the large gains made by the Western markets on Tuesday," Campbell added.

In London, foreign exchange deals on Wednesday, the euro fell to $1.1136 from $1.1202 late in New York on Tuesday.

On the London Bullion Market, gold crept upwards to $1,111.55 per ounce from $1,121.15.

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