US open: Stocks gain despite China market slump

US stocks gained on Monday as a further slide in China’s market fuelled hopes for additional stimulus measures.

The Dow Jones Industrial Average rose 0.37%, while the S&P 500 and the Nasdaq increased 0.37% and 0.41%, respectively at 1447 GMT.

Investors shrugged off another tumble in Chinese stocks amid concerns about the slowdown in the world’s second largest economy.

China’s inflation rose to 1.6% year-on-year, as expected, compared with 1.5% the previous month. However, the producer price was unchanged at minus 5.9% in December, according to the National Bureau of Statistics.

The People’s Bank of China on Monday set the yuan's reference rate against the dollar at 6.5626, up on Friday's fixing of 6.5636, but it did little to cheer the market.

“While China’s yuan currency was fixed slightly firmer, note Saturday’s Chinese inflation data which saw consumer price inflation edge up as expected to 1.6% but producer prices remain under pressure and fail to deliver the uptick expected by consensus,” according to Mike van Dulken and Augustin Eden at Accendo Markets.

“This data will only add to hopes of more intervention by the People’s Bank of China to both buoy the equity markets as well as the flagging growth that is concerning investors worldwide."

Meanwhile oil prices remained under the cosh amid worries about an oversupply in the market and tensions in the Middle East. At 1343 GMT West Texas Intermediate crude fell 0.63% to $32.95 per barrel and Brent dropped 1.2% to $33.12 per barrel.

Morgan Stanley warned that if rapid devaluation occurs, a 15% depreciation in the Chinese yuan alone could send oil into the $20s. “Oil is particularly levered to the US dollar with betas ranging from 2-5. If the USD appreciated 5%, oil could fall 10-25%,” the broker added.

On the economic data front, it’s a quiet day with the only notable release being the Labor Market Conditions Index Change for December which rose to 2.9 from 2.7 the previous month. Analysts had predicted a reading of 0.4.

The Atlanta Fed’s Dennis Lockhart will speak on the US economic outlook at 1740 GMT and the Dallas Fed President Robert Kaplan will speak on the economy and monetary policy at 2250 GMT.

The dollar was down 0.42% against the pound but up 0.44% against the euro and up 0.39% against the yen.

In company news, fourth-quarter earnings season begins this week, with Alcoa posting results after the close today, however those results aren’t expected to be promising. It also announced a $1.5bn long-term supply contract with General Electric’s aviation unit. Shares were up down 0.37% at 1449 GMT.

Tesla Motors declined after Elon Musk predicted a customer in Los Angeles will be able to “summon” their electric car via cellphone within two years.

Shire dropped after the company said it has agreed to buy Baxalta in a deal valued at about $32bn.