Stocks rally and oil rises on signs Chinese exports are in better shape than feared

Global markets enjoyed a relief rally on Wednesday, after Chinese trade data signalled that the wheels were not falling off the world’s second largest economy.

Exports rose by 2.3pc in yuan terms in December, compared with the same month a year earlier. Imports dropped by 4pc, a fall well below the 7.9pc anticipated by analysts.

Signs that China might not be rapidly approaching a much prophesied “hard landing” led European markets higher also, as the FTSE made gains of 1.1pc in early trading.

Oil prices rebounded somewhat, after falling below $30 a barrel for the first time in 12 years on Tuesday. West Texas Intermediate oil rose 2.5pc to $31.18 a barrel, while Brent crude rose 2.3pc to $31.57, amid speculation that concern over China’s economy has been overblow

Allan von Mehren, chief analyst at Danske Bank, said: “As China has been one of the big worries from the start of the year, this should help ease fears of a hard landing in China and support global risk sentiment.”

While China’s largest onshore stock index, the Shanghai Composite, declined 2.4pc despite the upbeat economic news, Mr von Mehren said that the offshore Hang Seng, based in Hong Kong, was a better proxy for the Chinese economy. This finished the day 1.1pc higher.

“Exports are on a rising trend and have been so since the autumn. It underpins our expectations that the Chinese economy is in a phase of stabilisation and gradual, albeit moderate, recovery,” he added.

However, analysts said that signs China had found its feet would not be met with the same euphoria as last year. After last September’s turbulence in Chinese stock markets, the Shanghai Composite made a dramatic recovery in the final quarter, ending 2015 in positive territory.

Bhanu Baweja, a UBS strategist, said that markets “should expect future episodes of yuan weakness”, given China’s relatively new currency regime.

Fears over China’s weakening economy will remain one of the “dominant forces” in global markets he said, arguing that equities were unlikely to stage the same “big relief rally” they enjoyed last year.

Since the last China-centred turmoil, the US Federal Reserve has embarked on a path of rate rises, and the European Central Bank has providing the eurozone with more financial support to stimulate economic growth.