Shares in China had a rough start to the week as the Shanghai Composite Index fell below 2,000 Monday for the first time in almost six months. New data showed that factory output and business spending had slowed in the People’s Republic, and concerns about company earnings remained. In addition, efforts to curb pollution in Beijing and Shanghai prompted shares of China Shenhua Energy, the nation’s largest coal producer, to fall to a record low.
The central bank dumped more than 255 billion yuan ($42 billion) into the financial system and Asian shares rebounded somewhat Tuesday as Chinese money rates eased, reducing concerns about a credit crunch.
European shares followed Asian shares and hit fresh 5.5-year highs on Tuesday. A report indicating that the Federal Reserve would trim its bond buying next week, for the second time in six weeks, boosted the dollar, and investors will be watching to see if the European Central Bank acts Tuesday to correct a recent sharp rise in money rates that could hamper the economic recovery there.
The GDP growth rate in Europe is less than 2%, so any enthusiasm in the markets may be due expectations for the year ahead, compared to historical averages. China’s growth has been stronger, but plenty of signs suggest that it is now slowing. For the moment, Europe seems to be on the upswing while China may be in a slump.
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