The Baltic Dry index, a global benchmark for global freight costs for dry bulk commodities such as iron ore, coal and grain, jumped 14.6 per cent, its largest one-day gain since 1985. The Baltic soared on hopes that Chinese steelmakers would step up imports of iron ore following comments from BHP Billiton. The Anglo-Australian miner said Chinese iron ore stockpiles were now largely depleted following production cutbacks.

China's stock market enjoyed a strong performance, with the Shanghai Composite up 2.3 per cent to a four-month high, on evidence that government stimulus measures for the economy were working. The rally followed a stronger-than- expected reading for the January purchasing managers' manufacturing survey and data showing bank lending growth accelerating to an all-time high in the first three weeks of January.

Credit Suisse said Chinese growth would prove more resilient than the rest of the world because its banking system was fundamentally sound and the government had a potentially huge policy response at its disposal, due to its massive foreign exchange reserves and current account surplus. Andrew Garthwaite of Credit Suisse said investors could be underestimating the impact of proposed measures aimed at boosting China's domestic consumption, citing pay rises for 12m schoolteachers and spending subsidies for 74m low-income consumers.