Chinese growth gives markets a boost

World markets brushed aside fears that Greece may be heading for a devastating debt default and rallied Tuesday after Chinese growth figures eased concerns of an abrupt slowdown in the world's second-largest economy.

With Europe sliding back toward recession and the US recovery still unconvincing, China's performance is important to shore up the global economy and market sentiment, especially when investors are fretting about a potential Greek default that could further roil financial markets.

Government figures showed that the slowdown in Chinese growth in the final quarter of 2011 was not as big as had been feared and would still see Chinese monetary authorities loosen policy.

Though the drop to 8.9 per cent represented the lowest rate in two and a half years, the markets had been expecting a bigger decline to 8.7 per cent.

"Chinese activity data for late 2011 was something of a 'goldilocks' result for investors," said Nick Bennenbroek, an analyst at Wells Fargo Bank. "Growth figures surprised to the upside, but were nonetheless consistent with an overall slowing trend, keeping the prospects for further Chinese easing intact."

Strong trades

Following Asia's strong performance, European and US markets have traded strongly.

Germany's DAX was up 1.5 per cent at 6,316 while the CAC-40 in France rose 1.1 per cent to 3,259. The FTSE 100 index of leading British shares was 0.6 per cent higher at 5,691.

In the US, the Dow Jones industrial average was up 116 points at late morning.

The rebound in sentiment was also evident in other markets, pushing the euro up 0.4 per cent to US$1.2730 and oil prices back above US$100 a barrel. Both assets often get supported when investors feel confident enough to take on riskier assets.

Greece is likely to remain the epicentre of the European debt crisis over the coming weeks as it struggles to agree a deal with its private creditors to get them to reduce the value of their holdings of Greek debt.

Last October, Greece's partners in the Eurozone sanctioned a deal whereby Greece's creditors agreed to take a cut in the value of their Greek bond holdings to help lighten the country's debt burden.

The deal with private investors, known as the Private Sector Involvement, or PSI, aims to reduce Greece's debt by €100 billion (US$127.9 billion) by swapping private creditors' bonds for new ones with a lower value. It is a key part of a €130 billion international bailout, the second one for Greece.

Talks on the PSI are expected to resume today, Wednesday, after being suspended last Friday.

- AP