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Markets Rally On China's Growth Slowdown

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Markets have surged higher despite official figures confirming China's growth slowdown as the world's second biggest economy reported its weakest annual expansion in 25 years.

The FTSE 100 Index was up by 2%, or more than 100 points, in early trading while Germany's Dax and France's Cac 40 also surged.

China's CSI 300 index of the largest listed firms on its Shanghai and Shenzhen markets rose 3%. But the indices are well down so far in 2016 after a volatile start to the year.

London's rally was led by UK-listed mining giants such as Anglo American, Glencore and Antofagasta whose fortunes are closely linked to the demand for commodities from China.

The CBI said it was important not to be too downbeat on the slowdown, with the country still representing a "huge contribution to the global economy" and a lucrative market for British business - though the spill-over effects of its economic woes could add to the risks to UK's prospects.

:: China's Economic Growth Falls To 25-Year Low

China's latest official economic data was seen as raising the chances of more stimulus policies such as interest rate cuts.

The economy grew 6.9% during the course of 2015, with the annual pace ticking down to 6.8% in the fourth quarter, official figures showed.  But there have been long-standing doubts about whether Beijing's figures truly reflect China's performance.

The figures matched forecasts but monthly readings on industrial output and retail sales were weaker than expected. The slowdown in retail sales growth to 1.1% year-on-year hit hopes that consumer spending will drive the economy while global trade stagnates.

Markets were buoyed by hopes that the data would mean more monetary easing measures soon, possibly before lunar new year holidays early next month.

Angus Nicholson, markets analyst at IG in Melbourne, said further stimulus by China was already looking a "foregone conclusion" before the data release and it was now a question of timing.

Rain Newton-Smith, CBI director of economics, said: "These figures paint a picture of a Chinese economy which is slowing and rebalancing, but still making a huge contribution to the global economy.

"In recent weeks, financial markets have struggled to digest this situation, alongside further weakness in oil prices.

"While direct links between the UK and China are relatively small, the spill-over effects from China's economic slowdown, alongside continued volatility in financial markets, amplify the downside risks to growth in the UK.

"Nevertheless, it's important not to be too downbeat about China or emerging markets more generally. With household incomes up by 7%, and online retails sales growing by 33% last year, China represents a lucrative market for British business."

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