Europe, Asian markets higher after Chinese stocks rebound Friday

The Shanghai stock exchange lost 9.97 per cent during the week, while Shenzhen dropped by 14.3 per cent. The CSI 300 was down 9.9 per cent on the week.

The failure of the “circuit breaker” to arrest, and possibly contribute to a frenzied sell-off has triggered a major debate in China. Thursday saw China’s stock markets abruptly shut after 29 minutes of trading, the shortest trading day in its history.

Overall, in this first week, Chinese stocks lost about 10 percent, their worst week since the market crashed in the week ending August 21.

The S&P 500 fell 1.4 percent, the Dow Jones Industrial Average fell by 1.3 percent and the Nasdaq Composite slumped by 1.8 percent.

Analysts said the dollar was under pressure because the Chinese turbulence raised questions about how fast the US Federal Reserve will tighten monetary policy, after making the first interest rate increase in more than nine years in December.

The DAX, Germany’s benchmark stock index, is off 7% for the year already and France’s CAC 40 is down 5%.

Just as the eurozone economy finally appears to be picking up speed, its future is clouded by concerns over China and the world economy.

The CSRC announced Thursday that anyone holding more than 5 percent of a company’s stock would only be allowed to sell off 1 percent of that company’s total shares in any three-month period, and would have to give the market 15 days notice before doing so. The MSCI Emerging Markets Index climbed 0.5 percent.

The euro also advanced – it is one of the so-called “funding” currencies investors flow into for buying riskier assets, like equities and commodities, which tumbled on Thursday.

“It is shaping up to be another (wildly) negative day in global equity markets”, said Douglas Porter, chief economist with BMO Financial Group, in a note to clients.

In the wake of Thursday’s selloff, the China Securities Regulatory Commission (CSRC), the public body in charge of regulating China’s economy, made a decision to suspend the system.

Chinese markets have had a tricky start to 2016, buffeted by the PBOC’s lower yuan fixings against the dollar, two days of stock exchange suspensions, weak factory and service sector surveys, and concerns about looming share sales by major stakeholders once a ban on such sales expires.

What all of this should tell you is that trying to manage the direction in which a stock market and a currency go is not only hard, it can also backfire and end up in entirely the opposite result.

In other Asian markets, Tokyo’s Nikkei 225 rose 0.4% to 17,848.10 while Sydney’s S&P/ASX 200 was off 0.7% at 4,973.20.

Oil plunged to around levels not seen since 2008, with the February contract for benchmark crude oil losing 70 cents to close at US$33.27 a barrel.

Investors were anxious that China’s moves to weaken the yuan would spark a currency war in the region as other countries tried to remain competitive.