China's Markets Rise Mysteriously

Chinese stocks, which had spent most of the day trading below par, saw a mysterious climb going into their last hour of trading and closed at the day's highs. The Shanghai Composite closed up just under 3% dragging shares higher in Hong Kong higher by 3.3%.

Over the weekend, speaking at the G20 summit in Turkey, Zhou Xiaochuan, governor of the People's Bank of China, said that the Chinese stock markets had almost completed their correction, and acknowledged the bubble in the country's markets. "Following the correction, levels of leverage are clearly lower and there has been no notable effect on the real economy," he added.

He also discussed the yuan devaluation, saying: "At present, the exchange rate of the renminbi against the dollar is stabilizing, the correction in the stock market is already mostly over, and the financial markets show hope for stabilizing."

My take on the end-of-day rally is that the Chinese government stepped in -- through the PBOC, through their Plunge Protection Team or via their "National Team" -- to buy shares on the exchanges. Of course, the Chinese have stated that they are not going to support their markets anymore. But doubts will linger -- in the minds of those outside China, and probably, in the minds of those inside the country, as well -- until the evidence clearly shows that their policies have changed.

China said that its exports in August were down 5.5% on the year and imports were down 13.8% -- a pretty grim piece of news for the much-vaunted recovery so often touted by U.S. Fed talking heads.

Other Asian markets were mixed on the day, despite the sweet end to the Chinese trading day. The Nikkei dropped to a 7-month low, down 2.4% on the day. Korea closed down 24 basis points, while the Sensex was up 1.7%, and Taiwan rose by 18 basis points.

Across the pond, markets are having a great morning. The CAC is up 2.1%, the DAX is higher by 2.4% and the FTSE has added 1.9% while they await our opening bell.

Futures are also indicating a "buy, buy," open -- with Nasdaq futures higher by 75, the Dow futures up 277 points and the S&P futures indicating a 35-point jump at the open. There is still about an hour and thirty minutes before our opening bell.

Good luck into the open and the rest of the week. Pretty exciting start.

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http://realmoney.thestreet.com/articles/09/08/2015/chinas-markets-rise-mysteriously