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European shares chased gains in China after calls from Beijing for greater co-operation with Washington helped sooth jitters over a regulatory crackdown in the world’s biggest emerging market.
Europe’s Stoxx 600 index rose 0.5 per cent on Monday, falling back after hitting new all-time highs reached in early trading, while the UK’s FTSE 100 rose 0.8 per cent led by economically sensitive stocks including banks and energy groups.
The gains came after the China Securities Regulatory Commission, Beijing’s market regulator, called on Sunday for closer co-operation with Washington, stressing the country’s efforts to improve transparency and predictability after a crackdown on tutoring groups obliterated the market value of the $100bn sector’s biggest companies.
Chinese listings in the US have become a geopolitical flashpoint as Beijing has sought to exert greater control over the country’s powerful tech sector. The US Securities and Exchange Commission said on Friday that Chinese groups that sought to sell shares in America would be subject to stricter disclosures.
Shares in China rebounded after their worst month in almost three years, with China’s CSI 300 benchmark of Shanghai- and Shenzhen-listed blue-chips rose 2.6 per cent on Monday, while Hong Kong’s Hang Seng index added 1.1 per cent. The city’s Hang Seng Tech index, which tracks big internet groups including Tencent and Alibaba, reversed early losses to rise 1 per cent.
Futures tracking Wall Street’s benchmark S&P 500 index climbed 0.5 per cent, while those following the tech-heavy Nasdaq Composite indicated it would rise 0.5 per cent at the New York open.
Last month, China’s cyber-security regulator announced plans to review all foreign listings by companies with data on more than 1m users after top leaders in Beijing called for an overhaul of how the country regulates initial public offerings in the US. The crackdown came just days after the $4.4bn listing of ride-hailing group Didi Chuxing.
The intensifying scrutiny of how Chinese groups access capital markets has pummelled stocks, delivering the worst month for China tech groups listed in the US since the global financial crisis. The Hang Seng Tech index fell 17 per cent last month.
“While we do not consider it prudent to completely avoid investments in China, further volatility can be expected until the first quarter of 2022, by which time we believe most regulatory changes may already be in place,” analysts at Credit Suisse wrote in a note on Monday.
Meanwhile, data released by China at the weekend showed that factory activity grew at the slowest pace in 15 months in July as demand contracted for the first time in more than a year.
Government bonds were steady with the yield on the benchmark US 10-year Treasury, falling 0.01 percentage points to 1.23 per cent. The equivalent German 10-year Bund yield was flat at minus 0.45 per cent.
Bond yields have been falling in recent weeks, despite higher than expected inflation readings in the US and indications from the US federal Reserve last week that it was moving a step closer to when it would start tapering its $120bn in monthly asset purchases.
The euro rose 0.2 per cent against the dollar to $1.1889, while the pound was flat purchasing $1.3899. Prices for global oil benchmark Brent crude fell 1.5 per cent to $74.34.
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