Why are ASX 200 shares rebounding on Friday?

S & P / ASX 200 index (ASX: XJO) stocks await a rebound today.

After falling 1.5% yesterday, the benchmark rose 1.1% in afternoon trading.

This is despite a further, more modest decline in US markets yesterday (Australian night time), which has led to S&P 500 slips another 0.6%. U.S. markets have come under new pressure amid fears of rising interest rates and a potential recession in the world’s leading economy.

So why do ASX 200 stocks get rid of the ailment to put on such a strong day?

Shares of the ASX 200 welcome news of the COVID restriction from China

Part of the answer seems to lie in the world’s number two economy and Australia’s main trading partner, China.

The Middle Kingdom can offer ASX 200 shares on two separate fronts.

First, China has announced that it will cut part of its economy COVID-19 restrictions. While China seems intent on pursuing its virus-free policy, the nation is lowering testing requirements for people arriving from the U.S. and other individual countries.

This could be the first step towards rebuilding the country and could see a surge in China’s economic growth.

What else has China said?

Other news from China that could help boost shares of the ASX 200 today is more than expected, a 0.15% reduction in the benchmark mortgage rate.

This is the second decrease this year, lowering the reference rate to 4.45%.

Chinese officials have said they are ready to take further steps to help stimulate economic growth.

Commenting on the move, Julian Evans-Pritchard of Capital Economics said (quoting Reuters), “Today’s reduction to the five-year loan rate should help stimulate a revival in housing saleswhich have gotten worse lately ”.

Evans-Pritchard warned that “the lack of any reduction to the annual LPR suggests that PBOC [People’s Bank of China] trying to continue targeted mitigation, and that we should not expect the large-scale incentives we saw in 2020. ”

As many shares of ASX 200 do business with China, any revival in the country’s massive housing sector would be welcome.