The writers argue that rating the world in terms of developed and emerging markets, among other things, is to hold an erroneous view in tracking the movements of global capital. Picture: REUTERS/ISSEI KATO
Asian stocks. Picture: REUTERS/ISSEI KATO

SINGAPORE/TOKYO — Asian shares rebounded on Friday, led by strong gains for battered Chinese stocks after China suspended its market circuit breaker and set a firmer midpoint rate for trading of the yuan for the first time in nine days.

Shares in Asia were still on track for their biggest weekly fall in more than four months, but Friday’s advances seemed to reduce some of the fear that has hit global markets.

China announced late on Thursday that it had suspended its new stock market circuit breaker introduced only on Monday as the system failed to reduce market volatility, with some market players even saying it backfired.

The CSI300 index of major Shanghai and Shenzhen stocks was up 2.7% and the Shanghai Composite index climbed 2.4%. The gains shrank losses for the week for both to less than 10%. Higher Chinese stocks also supported MSCI’s broadest index of Asia-Pacific shares outside Japan, which erased earlier losses to be up 0.6%. That put it on track for a loss this week of about 6%, which would be its biggest fall since August.

The People’s Bank of China (PBoC) helped soothe markets by setting a stronger yuan midpoint rate against the dollar.

It set the rate at 6.5636 to the dollar before market open, firmer than both the previous fix and Thursday’s closing quote. The spot market opened at 6.5700 to the dollar, and was trading at 6.5887 at 3.13am GMT.

The Chinese central bank on Thursday wrong-footed traders by reportedly intervening heavily to defend the yuan in offshore trade, reversing a decline of more than 1% that took it to a record low of 6.7600 to the dollar.

The PBoC’s Friday setting is "a signal it does not intend to keep allowing the yuan to fall", JPMorgan Asset Management global market strategist Yoshinori Shigemi said.

Japan’s Nikkei average erased earlier declines to rise 0.5%. The gain helped it recover from the three-month low on Thursday, although it remains on track for a drop of about 6% for the week, the biggest since September.

Wall Street also had a gloomy session, with the S&P 500 losing 2.4% on Thursday, with 40% of the stocks in the benchmark trading 20% or more off of their highs, the definition of a bear market.

That was despite a drop in layoffs and the number of Americans filing for jobless benefits, pointing to a strong December employment report on Friday.

However, weak data on US manufacturing, construction spending, car sales and export growth prompted economists to slash their fourth-quarter gross domestic product (GDP) growth estimates by as much as one percentage point to as low as a 0.5% annual pace. The economy grew at a 2% annual rate in the third quarter.

After the US market close, two Apple suppliers added to growing worry about slowing shipments of iPhone 6S and 6S Plus by cutting their revenue estimates for the third quarter.

The Chinese moves offered a leg up to oil futures, with both Brent crude and US oil rallying more than 2% at one point.

Brent gained 1.9% to $34.40 after touching $32.16 on Thursday, the lowest since April 2004. The gains narrowed losses for the week to 7.7%. West Texas Crude advanced 1.9% to $33.91, on track for a weekly loss of 8.4%. The shaky risk appetite seen this week sent investors flocking to low-risk assets such as bonds, gold and traditional safe-haven currencies, although that demand eased slightly on Friday.

The 10-year US treasuries yield fell to a two-and-a-half-month low of 2.119% on Thursday and last stood at 2.1773%. Gold eased back to $1,103.4/oz after earlier rising to $1,112, the highest since November 4. That brought gains for this year to 4.8%. The yen pulled back from Thursday’s four-and-a-half-month high of ¥117.33, last trading at ¥118.20. The euro slipped 0.4% to $1.0886.

The Australian dollar, often used as a liquid proxy for Chinese trade, strengthened to $0.7054 after falling to a three-month low of $0.6981 on Thursday. It is down 3.1% so far this year.