U.S. stocks rise as Chinese stock markets surge
MARKETS in the U.K., Germany, France and Japan rose on Tuesday after news of a suspected insider trading scandal in China.
The Dow Jones Industrial Average ended up 1.7 percent, the S&P 500 added 1.3 percent and the Nasdaq Composite gained 2.3.
The Nasdaq fell 1.1 percent and both the S &p 500 and the Dow dropped 1.2 percent.
The Russell 2000 index, which tracks the price of stocks based on their performance over the past five years, rose 1.4 percent.
The Chinese market is the biggest since mid-2014, when a global recession and the U-turn by Beijing led to a sharp drop in foreign demand for Chinese goods.
The Shanghai Composite, which measures the sector’s strength, was up 1 percent.
A Chinese benchmark index index is down more than 10 percent over the previous six months.
“It’s a sign that the Chinese are coming around and getting back on track,” said David Prentiss, head of global macro strategy at Macquarie Asset Management in Sydney.
The markets are reacting to a “serious incident” that led to the sale of some of the biggest stocks in China, Prentis said.
He noted that Chinese stock prices have been volatile in recent years, but that this time there were no major disruptions.
In a note to clients, the investment bank said that the “serious allegation” by an unnamed insider in March that he had sold 1.5 billion shares of stock in the country’s largest state-owned companies was the first to trigger an investigation.
That was followed by a series of news stories about the alleged insider trading, the bank said.
The investigation into the alleged wrongdoing is ongoing.
Investors should not consider the current stock market “too risky,” it said.
The Shanghai Composite closed at 4,890.30 on Tuesday, the best closing level since March 31.
The benchmark index of China’s 10 biggest companies closed at 7,917.40 on Tuesday.