Wall Street on a roll as China triggers rally

Dow, S&P hit records, world shares near 6-year high on Beijing reform and US stimulus hopes

PUBLISHED : Tuesday, 19 November, 2013, 2:52am
UPDATED : Tuesday, 19 November, 2013, 2:52am

World shares hit a near six-year high yesterday, boosted by signs of ambitious economic reforms in China and the prospect of extended stimulus in the United States.

US stocks rose in the morning, sending the Standard & Poor's 500 Index above the 1,800-point level and the Dow Jones Industrial Average over 16,000 for the first time. European shares extended the longest rally in 15 months.

The H-share index of mainland stocks listed in Hong Kong put on 5.7 per cent in its best day in two years after the Communist Party last week unveiled surprisingly bold economic reforms in which it said the market would play a decisive role and expanded farmers' land rights as part of the biggest package of economic reforms since the 1990s.

UBS upgraded H shares to "overweight" on a view the string of growth-friendly reforms announced after the party's third plenum should help them outperform Asia, excluding Japan, for the next few months.

"The initial reaction to the Chinese communication was a negative one but as we're getting more details, it looks like this is a revolutionary change," said Nader Naeimi, the Sydney-based head of dynamic asset allocation at AMP Capital Investors.

"We're starting to get optimism coming through the market. The turnaround in sentiment and the improving macro data should push the equity market higher into 2014."

"We believe China is on the cusp of a massive multi-year bull run," Christie Ju, the managing director of Jefferies Group in Hong Kong, wrote in a note to clients.

The Stoxx Europe 600 Index increased 0.5 per cent. The benchmark gauge rose for six straight weeks as signs emerged the Federal Reserve will not rush to reduce the pace of its stimulus, outweighing data that showed the euro-area economic recovery is faltering.

India's Sensex advanced 2.2 per cent and benchmark gauges in Brazil, Indonesia, Turkey, Poland and the Czech Republic all climbed at least 1 per cent.

The focus, however, remained on Asia and the hopes that China's planned changes could make its - and therefore the global - economy healthier in the coming years.

Shares in Shanghai rose 2.9 per cent and Asia-Pacific shares outside Japan added 1.4 per cent to lift MSCI's world share index to its highest level since the start of 2008.

"China is obviously important long term for the market, so it is going to welcome that they have a 10-year plan, that it is sensible, that it is not too radical and that it is a move towards reform," said Joe Rundle, the head of trading at ETX.

ANZ analysts said the planned changes represented "the biggest freeing up of China's economic policy since the 1990s" and, if implemented successfully, would "substantially reduce the downside risks to China's economy".

Reuters, Bloomberg