Futures higher, Chinese stocks volatile after rout

The CSI300 index closed up 2% at 3,361.56 points on Friday, while the Shanghai Composite Index.SSEC also closed up 2% at 3,186.41 points.

Chinese stock markets have cooled down on Friday after creating buzz in the global markets. The selling earlier in the week triggered “circuit breakers” that are created to smooth volatility in the markets. However, the markets’ continued losses are a sign that China’s economy continues to weaken and that plans to use a mix of interventionist tactics and currency devaluation to address it are not proving reassuring.

All 10 major S&P 500 sectors were higher with the consumer discretionary index’s 0.95 percent rise leading the advancers. However, Chinese authorities have suspended the newly adopted breaker mechanism after it halted trading twice during the week, triggering a mass sell-off each time. The bank set the daily fixing of Yuan restricting the onshore moves to maximum 2% at 6.5636/dollar on either side which is 0.5% on the higher side of the onshore effective closing price on Thursday.

Analysts said on Friday, the reversal of the policy injected new life into the market.

“Confidence in China’s ability to manage their capital markets has only been further damaged after they announced the removal of their “circuit breakers” after only being in place for four days”, said Angus Nicholson of IG in a report.

Deng Ge, the spokesman for the China Securities Regulatory Commission, said at a news conference that the regulator will appropriately arrange the new share sales based on the principle of enhancing trading vitality and stabilizing the market.

The gains early Friday came a day after the market had its worst drop in three months. In fact, China’s central bank raised its target rate for the yuan for the first time in over a week.

China’s stock market closed the first week of 2016 trading Friday up 2 percent after regulators enacted a circuit breaker mechanism to calm panicky investors. The tech-heavy index plunged 3% to 4689.43, leaving it more than 10% below its July record close.

The yen pulled back from Thursday’s 4 1/2-month high of 117.33 yen, last trading at 118.35 yen. A flurry of Chinese economic data in the coming weeks is likely to show that economic activity continued to slow in December, adding to concerns about the outlook for 2016, and lets not forget USA unemployment numbers due out this morning.

In commodities trading, crude oil futures are climbing USD0.36 to USD33.63 a barrel after sliding USD0.70 to a almost twelve-year low of USD33.27 a barrel on Thursday. People tried so hard to avoid being stuck with losing shares that “panic set in when prices fell by only 3 percent”.

However, weak data on US manufacturing, construction spending, auto sales and export growth prompted economists to slash their fourth-quarter GDP growth estimates by as much as one percentage point to as low as a 0.5 percent annual pace.