TSX, Dow move sharply higher as Chinese stocks rebound

North American stocks moved higher on Tuesday, following the trend set by financial markets in China and Europe.

It was the second-largest daily gain for the Dow this year, following an even bigger surge two weeks ago.

The Canadian dollar also strengthened, trading up more than half a cent at 75.68cents US.

The loonie may be moving higher because most analysts are predicting Canada's central bank will leave rates unchanged.

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Markets shrugged off data from China showing shrinking imports and exports, and reacted instead to the more than 2.9 per cent rise in Chinese stocks today.

That rise may have been driven by Beijing's continued attempts to hold up its market. On Monday, the People's Bank of China head Zhou Xiaochuan told investors: "The correction in the stock market is almost done."

Shanghai's gains today encouraged European investors which helped to push up North American stocks.

Germany's growing

Europe was also encouraged by reports that Germany's trade surplus had risen 2.4 per cent to a record high in August, helped by the fall of the euro against the U.S. dollar.

There was not much support from oil, as West Texas Intermediate crude fell 24 cents to $45.81US a barrel. Brent, the most common international contract, rose $1.77 to $49.39 US.

Stock markets have been making wide swings throughout the summer and especially since China devalued the yuan in mid-August.

CIBC World Markets analyst Benjamin Tal warns more of the same may be ahead.

Volatility the new normal

"The recent market volatility should not be seen as a one-off event, but rather as a symptom of significant ongoing change in the trajectory and composition of global economic activity," he wrote in a report to clients.

"The decline in commodity prices means a huge transfer of income from producing countries to consuming countries, while changes in China reflect a deliberate march towards liberalization of the world's second-largest economy with many global implications," he said.

Because Chinese demand has such a strong impact on commodity prices, more uncertainty remains ahead as its economy restructures, Tal said.

However, CIBC found in a survey of Canadians that 85 per cent of respondents said they held on to their investments, despite the big ups and downs of the past month.