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Bourse rallies on hopes of China stimulus

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1 Bourse rallies on hopes of China stimulus on Tue May 22, 2012 9:17 pm



Bourse rallies on hopes of China stimulus

Source: The Australian

THE Australian equities market made a positive start to the week yesterday after last week's 5.6 per cent drubbing, on news China could contemplate a fresh stimulus package to maintain growth in the powerhouse economy.

The S&P/ASX 200 opened strongly higher, dipped briefly into negative territory before rallying late in the session to close 27.1 points higher at 4073.6.

The All Ordinaries gained 25.6 points to 4124.4 which helped recover some of the $64 billion that was wiped from the value of local stocks last week.

European markets opened slightly higher last night and Dow futures were pointing to gains on Wall Street.

The Australian dollar remains under parity and last night was trading at US98.28c, down from its high of US98.77c during the day, but largely in line with Friday's local close.

Sentiment in the domestic trading session remained cautious on the future of the eurozone and the next round of Greek elections, on June 17.
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However, the market received a boost after reports Chinese premier Wen Jiabao would push for further growth.

Xinhua News Agency reported that Mr Wen planned to put "stabilising growth in a more important position" to strengthen the economy.

A Bloomberg survey found the Chinese economy could be on the verge of recording its biggest growth slowdown in 13 years. Mr Wen said the Chinese economy was stable but the "domestic and external environments are becoming even more complex".

Early futures trading last night was pointing to the Dow Jones opening at least 58 points higher despite the ongoing European concerns.

The G8 summit on the weekend failed to produce a clear outcome on the future of the troubled eurozone. IG Markets institutional dealer Chris Weston said despite the positive tone in markets yesterday, sentiment would remain fragile.

"We are coming off the worst week for stocks in some time and clearly sentiment is shot to pieces, volatility is higher," Mr Weston said. "Where there is noise there is opportunity, and while the downside implications of a Greek default have been widely publicised in the weekend's press, it is still our belief that Greece will remain in the European Monetary Union and, for those with a longer-term horizon, stocks should offer good value." Fxpro chief economist Simon Smith said the tumbling Australian dollar was "going down the elevator shaft" after being hit by a storm of international factors.

"The currency has been constantly on the back foot over the past three weeks," he said.

"Obviously the continuing uncertainty over just when Greece will leave the euro and the contagious effect this is having on the likes of Spain and Italy is weighing very heavily on risk appetite. Also, there has been news that emerged out of China overnight reaffirmed that the economy is experiencing a much tougher time."

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