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The improving U.S. economy has China to thank

The improving U.S. economy has China to thank

Good news, America!  The Chinese government’s program to stimulate its economy has given U.S. stocks their biggest leap since March

U.S. economy helped

U.S. stocks surged to their biggest gain in two months on Tuesday, May 10, after the Chinese government moved to stimulate the world's second-largest economy. That gave a big boost to energy, chemicals, and machinery companies.

For months investors have worried about the state of China's economy, which is slowing down after a quarter-century of rapid growth. The prospect of greater sales to China lifted companies that make basic building materials, chemicals, building and mining equipment, and aircraft. The price of oil matched a six-month high, and shares of companies that drill for oil and refine it also rose.

Investors have been taking money out of stocks lately, said Bob Doll, portfolio manager at Nuveen Asset Management. He said they were glad to see China's government do something about its economy.

U.S. trade hurt

However, China's move might inflame tensions with Western trading partners that accuse Beijing of flooding their markets with steel and other goods at improperly low prices. Beijing is struggling to reduce a glut of goods in an array of industries and reverse an export decline that threatens to cause politically dangerous job losses.

In its latest measures, China's Cabinet promised more bank lending, an increase in tax rebates, and support for export credit.

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Source: Houston Chronicle, May 10, 2016