China pledge to avoid credit crunch lifts markets

Global markets recover after Chinese central bank says ready to avoid credit market trouble

LONDON (AP) -- Global stocks recovered on Tuesday after China's central bank eased concerns about a credit crunch in the world's second-largest economy and U.S. economic indicators were upbeat.

China's central bank had caused a global rout in markets on Monday when it moved to curb so-called shadow banking — unregulated lending to companies starved of credit by traditional banks. Investors worried that would cause an increase in borrowing rates for companies, hurting business.

On Tuesday, the central bank issued a statement saying it would act to keep credit markets functioning, if needed. That helped stocks rally in Europe and the U.S., though it came too late to help Asia, where the main markets closed lower.

In Europe, Britain's FTSE 100 rose 1.2 percent to 6,100.21 while Germany's DAX gained 1.8 percent to 7,827.66. France's CAC-40 rose 1.5 percent to 3,649.77.
Wall Street also opened higher, with the Dow Jones industrial rising 0.7 percent to 14,759.16 and the broader S& P 500 advancing 0.9 percent to 1,586.62.
Trading was also supported by new figures showing a 3.6 percent rise in U.S. sales of durable goods last month and a 12.1 percent jump in house prices in April. The numbers suggest a firm improvement in the world's largest economy. Investors will later monitor the Conference Board's consumer confidence index for June.

Market sentiment was also supported by European Central Bank President Mario Draghi's reassurances that existing crisis-fighting measures will remain in place.
Draghi said it was important to keep the central bank's bond-buying program, which has helped keep borrowing rates down across Europe for the past nine months, since there is uncertainty surrounding the policies of other central banks. That was a thinly-veiled reference to the Federal Reserve, which is expected to start winding down its monetary stimulus in coming months.

The Fed's bond-buying stimulus program has been keeping rates low, encouraging traders to buy riskier assets such as stocks and to invest in emerging markets, driving many equity indexes to record or multiyear highs. Concern over how markets will handle the end to the program, however, has made investors nervous and caused volatility.

Earlier in Asia, the Shanghai Composite Index fell another 0.2 percent to close at 1,959.51 after trading nearly 6 percent lower earlier in the day and shedding 5 percent the day before, its biggest loss in four years.

Hong Kong's Hang Seng rose 0.2 percent to 19,855.72, overcoming earlier losses, while the Shenzhen Composite Index lost 0.2 percent to 879.93.

Japan's Nikkei 225 shed 0.7 percent to 12,969.34. South Korea's Kospi dropped 1 percent to 1,780.63 and Australia's S& P/ASX 200 was down 0.3 percent to 4,656. Stocks in the Philippines and Indonesia also declined while India and Singapore gained.
In energy markets, the benchmark oil contract for August delivery was up 39 cents to $95.57 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.49 to close at $95.18 in New York on Monday.

In currencies, the euro was down 0.1 percent at $1.3105 while the dollar fell 0.1 percent against the Japanese yen, to 97.61 yen.