European shares rebound, China weighs on Asia

Shutterstock [http://www.shutterstock.com]

London - European stocks rose on Monday, led by a surge in mining and commodities giant Glencore after it pledged to slash its debt by a third, but a fall in China after markets there reopened after a four-day break dragged down Asian bourses.

Trading is lighter than usual with US markets closed for Labour Day, while investors across all asset classes continued to digest the implications of last week's US jobs data on the timing of the first US interest rate hike since 2006.

In early trading the FTSEuroFirst index of leading 300 shares was up 1% at 1 407 points and Britain's mining-heavy FTSE 100 index was up 1.3% at 6 119 points .

Glencore shares soared 11% to 136 pence after it said it will suspend dividends, sell assets and raise $2.5bn in a new share issue as it aims to cut its debt to $20bn by the end of next year.

"The time was ripe for management to address the problems and any measures that might shore up some confidence in what was beginning to look like a penny stock are clearly welcome," said Brenda Kelly, head analyst at London Capital Group.

"Dividend cuts, asset selling and a new debt reduction plan appear to be doing the trick," she said.

The rally in Europe was broad-based, marking a rebound from Friday's steep losses of close to 3% after investors marginally upped their bets that the Federal Reserve could raise US interest rates later this month.

Germany's DAX was up 1.2% at 10 161 points and France's CAC 40 was also up 1.2% at 4 580 points .

It was a different story in Asia, where MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.7%.

Chinese stocks took centre stage when markets reopened after closing over Thursday and on Friday as Beijing celebrated 70 years since the end of World War Two.

Shanghai shares initially rose as much as 1.8% following remarks over the weekend by regulators aimed at calming the market, but reversed course and closed down 2.5%.

China's policymakers and regulators tried to soothe jittery markets, promising deeper financial market reforms and stressing the economy was showing signs of stabilising.

Beijing also trimmed its 2014 growth figures on Monday, and said its foreign exchange reserves fell in August by $93.9bn - the largest monthly fall on record - to $3.55trn.

Good news!

Financial leaders from the world's 20 biggest economies agreed on Saturday to step up reform efforts to boost disappointingly slow growth, saying reliance on ultra-low interest rates would not be enough to accelerate economic expansion.

But they also said they were confident growth would pick up and, as a result, interest rates in "some advanced economies" - code for the United States - would have to rise.

Investors are still uncertain whether rates will rise this month but that scepticism was diluted a little on Friday after figures showed nonfarm payrolls increased 173 000 last month and the unemployment rate dropped to 5.1%, its lowest in more than seven years.

"With Fed 'lift-off' coming soon and the US recovery on track, we expect to see the 10-year yield close to 3% by the end of 2016. And that will be good news!" wrote Societe General strategists in a note to clients.

The 10-year Treasury yield closed at 2.13% on Friday , the lower end of its range over the last two weeks.

Core European government bonds were slightly weaker on Monday, with the 10-year German yield up a basis point at 0.68% and the 30-year yield up 3 basis points at 1.40%.

In currencies the dollar was largely steady, rising 0.2 percent against the yen to 119.30 yen, but yielding against the euro, which edged up 0.1 percent to $1.1153.

The euro had dipped below $1.11 on Monday and on Friday after the U.S. jobs data.

In commodities, crude oil fell on a lingering supply glut. U.S. crude oil futures were down 0.9 percent at $45.65 a barrel and Brent crude dropped 1 percent to $49.11 a barrel .

ZAR/USD
16.75
(+0.21)
ZAR/GBP
21.01
(+0.46)
ZAR/EUR
19.09
(-0.07)
ZAR/AUD
11.67
(-0.05)
ZAR/JPY
0.16
(+0.36)
Gold
1808.56
(+0.35)
Silver
19.19
(+0.43)
Platinum
824.33
(-0.24)
Brent Crude
42.17
(-1.20)
Palladium
1946.00
(-0.23)
All Share
55541.28
(-1.17)
Top 40
51235.09
(-1.23)
Financial 15
10528.08
(-1.64)
Industrial 25
75515.64
(-1.81)
Resource 10
53219.66
(-0.20)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
18% - 2060 votes
I am taking a hit, but should be able to recover in the next year
23% - 2669 votes
My finances have been devastated
35% - 4014 votes
It's still too early to know what the full effect will be
25% - 2880 votes
Vote