Stocks Revived by China Rebound as Treasuries Pull Back With Yen

Global markets exhaled as Chinese stocks staged their biggest rebound since 2009, easing concern that the rout will exacerbate a slowdown in the world’s second-largest economy. U.S. stocks pared gains as investors positioned themselves ahead of Greece’s bailout deadline.

The MSCI All-Country World Index snapped a five-day drop by 5 p.m. in New York, as the Shanghai Composite Index rallied 5.8 percent and Hong Kong-traded Chinese stocks also rebounded. The Standard & Poor’s 500 Index ended Thursday up 0.2 percent after sliding 1.7 percent last session, while European shares jumped 2.2 percent. Demand for haven assets ebbed, with the yen slipping from a seven-week high and Treasuries reversing Wednesday’s gains. Crude oil and metals led commodities higher.

“Sentiments have reached a point where people feel comfortable scaling back into risk,” Mark McCormick, a foreign-exchange strategist at Credit Agricole SA in New York, said by phone. “You’re just seeing the mood improve a little bit. I don’t think we’re a step closer toward getting back into ’all clear.’”

With markets already unsettled by the toing and froing over Greece, China’s equity selloff -- sparked by margin investors unwinding trades amid concern over a bubble -- fueled concern over the state of the global economy. The rout took a breather Thursday after regulators banned major shareholders from selling stakes and with more than 50 percent of listed companies suspended from trading. Back in Europe, Greece submitted a new package of economic reforms and spending cuts.

U.S. Gyrations

The S&P 500 rallied as much as 1.4 percent Thursday before giving up more than half its gains as the afternoon progressed, slipping again below its average price for the past 200 days. The index closed below that key level on Wednesday for the first time since October.

“Every time we get to the end of the day we start losing steam because people start worrying about what’s going to happen overnight,” said Randy Warren, who manages more than $100 million at Exton, Pennsylvania-based Warren Financial Service & Associates Inc.

The largest U.S.-listed exchange-traded fund tracking Chinese stocks soared 20 percent in New York amid relief over Thursday’s rebound. Futures on Chinese shares were more mixed, with contracts on the CSE 300 Index up 10 percent in recent trading, while futures on the FTSE China A50 Index, a gauge of the biggest mainland-traded companies, were little changed in Singapore. Hang Seng China Enterprises Index futures added 4.3 percent.

China Concerns

Chinese shares have slumped more than 23 percent the past two weeks, with losses at the start of the week igniting a wave of risk aversion. Renewed confidence in the market saw 10-year Treasury yields rising for the first time in five trading days, adding 13 basis points, or 0.13 percentage point, to 2.32 percent on Thursday. The yen retreated against all 16 of its major peers after surging 1.5 percent to the dollar.

“There was major concern that the situation in China could get out of control,” said Christian Gattiker, head of research at Julius Baer Group in Zurich. “China and Europe are at least stabilizing and not accelerating further to the downside, so this brings back some of the confidence.”

The International Monetary Fund cut its forecast for global growth this year on Thursday, citing a weaker first quarter in the U.S. The Washington-based lender expressed confidence that financial-market turbulence from China to Greece won’t cause widespread damage. Minutes of the Federal Reserve’s June meeting, published Wednesday, indicated officials thought tighter monetary policy was warranted, despite concern over risk from abroad.

Investors will get further clues on the Fed’s outlook when Chair Janet Yellen speaks on Friday.

Euro Retreats

The euro fell 0.4 percent to $1.1036 on Thursday, with Greek Prime Minister Alexis Tsipras under pressure to show how far he’s willing to go to keep Greece in the euro. European leaders have expressed skepticism that he can deliver the tough reforms. Pressure is also mounting on Greece’s creditors to make the country’s debt more sustainable, giving it a chance to rebound from a crisis that has slashed a quarter of its economy.

U.S. investors are also shifting focus to corporate profit reports for signs of the economy’s strength. Alcoa Inc., which unofficially kicked off the earnings season Wednesday, advanced 0.9 percent Thursday after its second-quarter sales beat estimates. Walgreens Boots Alliance Inc. gained 4.2 percent after quarterly profit topped analysts’ projections.

Apple, Intel

JPMorgan Chase & Co. and Wells Fargo & Co. are among S&P 500 firms reporting results next week. Analysts project earnings for companies on the gauge dropped 6.5 percent in the second quarter.

Apple Inc. dropped 2 percent to the lowest level since February and Intel Corp. slid 1.9 percent as technology hardware and semiconductors posted the biggest declines in the S&P 500. Apple’s two-day drop was 4.5 percent, its worst performance since September.

The Stoxx Europe 600 Index rebounded Thursday, with banks advancing the most, after the European equities gauge closed Wednesday almost 10 percent below its April record.

Emerging-market shares rallied from a two-year low, surging 1.7 percent for the biggest one-day gain since January.

The magnitude of price swings on the Shanghai Composite gauge is at the highest since at least 2008, according to data compiled by Bloomberg. The government’s support measures are a sign of “desperation” and will fuel fear among investors, said Mark Mobius, executive chairman of the Templeton Emerging Markets Group. The efforts just “postpone the inevitable,” according to Wells Fargo Funds Management.

Commodities Rebound

China’s official Xinhua News Agency reported Thursday that the public security ministry will look into “malicious” shorting of stocks. Traders unloaded a record 112 billion yuan ($18 billion) of shares purchased with borrowed money on the Shanghai exchange Wednesday.

The Bloomberg Commodity Index rose for a second day, climbing 1.2 percent, the most this month. Nickel led gains among industrial metals with the biggest two-day rally since 2012. Copper advanced 2 percent and silver rose 1.6 percent. Aluminum and lead entered bear markets this week, and copper has fallen 11 percent this year, amid concerns over China, the world’s biggest consumer of base metals.

Oil rebounded from the biggest five-day decline in almost four years, with West Texas Intermediate crude up 2.2 percent to $52.78 a barrel in New York. It dropped 13 percent in the five days through Wednesday.