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Markets diverge, commodities fall, China fears persist

Wall Street advanced yesterday while European shares and commodities fell as investors balanced strong US economic data and policy comments with fears about China’s slowing economy.

The benchmark S&P 500 was up 0.7 per cent in afternoon trading, off its earlier highs, helped by stronger-than-expected data on durable goods orders and comments that appeared to make a September interest rate hike less likely.

New York Fed President William Dudley said a rate hike next month seems less appropriate given the threat posed to the US economy by recent global market turmoil.

Most US Treasuries prices turned positive, erasing earlier losses, after Dudley’s rate hike comments.

Europe’s FTSEurofirst 300 index of major companies fell 1.9 per cent in a choppy trading day. China’s key share indexes also ended down after attempts to move higher were slapped back by waves of selling several times, reflecting hopes for more government and central bank support.

The Shanghai Composite Index ended down 1.3 per cent, its fifth straight day in the red as Beijing also dished out another round of trading bans.

“Everybody’s just on guard and aware of the potential for greater volatility than we’ve seen in quite a while.

“We’ve seen investors dip their toes and buy high-quality names they like that they can get cheaper,” said Brian Fenske, head of sales trading at ITG in New York.

He added, “You could call me two hours from now and we could be down.”

At 12.35pm, the Dow Jones industrial average rose 122.43 points, or 0.78 per cent, to 15,788.87, the S&P 500 gained 13.14 points, or 0.7 per cent, to 1,880.75 and the Nasdaq Composite added 29.44 points, or 0.65 per cent, to 4,535.92.

The CBOE Market Volatility Index was still elevated at 35.5, indicating significant uncertainty, though the “fear index” was well below Monday’s 6-1/2 year peak of 53.3.

The dollar index, which measures the greenback against a basket of major currencies, pared its gains after the Dudley comments but was up 0.3 per cent.

Despite China’s struggles, Asia markets had some bright spots. Japan’s Nikkei saw a 3.2 per cent jump and Korea’s KOSPI showed its biggest jump in two years with a 2.6 per cent increase.

Oil prices were hurt by a bigger-than-expected increase in US gasoline stocks, compounding negative sentiment from worldwide equities that pushed fuel prices to 6-1/2-year lows.

Brent crude futures were last down 0.3 per cent at $43.07 per barrel, while US crude was down 0.9 per cent at $38.97.

Copper, often considered a proxy for Chinese and global economic activity, was down 3.1 per cent tumble while prices of gold, traditionally a safe-haven asset, were off 1.4 per cent.

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