Chinese stimulus sparks 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.

European exchanges and Wall Street also pushed strongly higher, although the gains were later pared by US data that reminded investors they also have to take into consideration the timing of a hike in US interest rates.

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.

London's FTSE 100 index climbed 1.35 percent to close at 6,229.01 points, led by a rebound in mining stocks which have been pummelled as the Chinese slowdown has led to a slump in commodities prices.

In the eurozone, Frankfurt's DAX 30 gained 0.31 percent to finish at 10,303.12 points and the Paris CAC 40 rose 1.44 percent to 4,664.59. Madrid shot up 1.74 percent and Milan by 0.84 percent.

"Rumblings of an accelerated fiscal stimulus plan in China coupled with the World Bank's chief economist's warning against a US rate rise proved enough to extend the rally in equities for a third day," said analyst Jasper Lawler at CMC Markets.

But "early gains slipped back slightly in afternoon trading after economic data showed a record rise in US job openings, something the Fed may factor into next week's rate decision," he added.

While the data would unlikely sway the Federal Reserve on its decision whether or not to raise US interest rates for the first time since 2006, raising them from the unprecedented zero level they were down brought down to to rescue the economy, the data was a sign of strength in the economy the could lead to future wage pressure, said Lawler.

Wall Street's gains had nearly disappeared by midday, with the Dow Jones Industrial Average up 0.08 percent to 16,505.11 points.

The broad-based S&P 500 rose 0.06 percent to 1,970.53, while the tech-rich Nasdaq Composite Index gained 0.07 percent to 4,815.13.

The 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 $1.1156 from $1.1202 late in New York on Tuesday.

On the London Bullion Market, gold crept upwards to $1,105.32 per ounce from $1,121.15.

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