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 While Japan's Nikkei jumped nearly 6 percent and Brent crude was
up more than 5 percent, the benchmark Shanghai Composite Index
<.SSEC> managed a rise of just 1.25 percent, following sharp losses
on Thursday.
The CSI300 index <.CSI300> of the largest listed companies in
Shanghai and Shenzhen closed up 1 percent.
The indexes veered between positive and negative territory during
the day, with little volume behind the trade. The Shanghai Composite
did at least end the week marginally higher than it began, for the
first time in 2016, but not the CSI300.
Investors appear increasingly reluctant to risk their money on
China's fickle markets, which have slumped about 17 percent so far
this year, and morning gains have often turned to losses by close of
day as traders quickly take profits.
Highlighting the lack of faith in the markets, trading volumes in
January have been about a third of typical levels last year, which
only exaggerates price movements.
 On Thursday, Vice President Li Yuanchao sought to reassure investors
that Beijing would use regulations to prevent volatility in a market
that was "not yet mature".
"An excessively fluctuating market is a market of speculation where
only the few will gain the most benefit when most people suffer,"
Li, who is attending the World Economic Forum in Davos, said in an
interview with Bloomberg.
Measured by actions rather than words, regulators' attempts to curb
volatility, notably a new circuit breaker mechanism that was ditched
after three days of violent falls, have conspicuously failed.
The stock markets and China's yuan currency have come under pressure
as a raft of economic indicators have confirmed the country's
declining growth, putting the world's second-largest economy at the
top of global investors' worry list along with plunging crude oil
prices.
There were some rare nuggets of good news on Friday, with data
showing a pick-up in lending to China's property market, and that
urban unemployment was unchanged at 4.05 percent, comfortably below
the government's target. But most economists believe China's real
jobless rate is higher.
Concerns about another near-term yuan devaluation are slowly fading
as the People's Bank of China (PBOC) has steered a steady course for
the currency daily midpoint fix <CNY=SAEC> in recent weeks. But
currency markets remain puzzled over the formula the central bank is
using to determine its value and say spot yuan will remain under
pressure as the economy continues to cool. Friday's fix was again
barely changed at 6.5572 per dollar.
The spot yuan <CNY=CFXS> clung tightly to its previous close, as it
has all week, while offshore it weakened slightly to 6.6076, 0.4
percent adrift from the onshore rate.
 European and U.S. markets took heart after European Central Bank
President Mario Draghi dropped a heavy hint that more stimulus could
come as early as March.
His comments sliced 1 percent from the euro as markets quickly
priced in a rate cut for March, three months ahead of previous
forecasts.
GENEROUS LIQUIDITY
Speculation is also rife that the Bank of Japan might ease policy
further, possibly as early as next week.
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The central bank is "taking a serious look" at expanding its
asset-buying campaign as sliding oil prices make it ever harder to
reach its 2 percent inflation goal, the Nikkei newspaper reported on
Friday.
All of which was grist to the mill for those expecting more action
from the People's Bank of China (PBOC).
The central bank has already been generous with liquidity, pumping a
net 315 billion yuan ($48 billion) into the banking system ahead of
the Lunar New Year holiday in early February.
It was the biggest weekly injection since January 2014 and analysts
suspected it was larger than that warranted to avoid any hint of a
cash crunch during the long holiday.
There was also more reassurance from officialdom in Davos.
Fang Xinghai, the vice chair of the Chinese Securities Regulatory
Commission, sought to counter concerns China was seeking to devalue
the yuan to gain a competitive advantage for its exports.
"A depreciation is not in the interests of China's rebalancing; a
too deep currency fall would not be good for consumption," Xinghai
said.
Speculators have taken to using the yuan's cheaper offshore forwards
market to wager China will finally devalue the currency around March
or April.
Economists at ING, however, said they were expecting policy measures
to keep the yuan's fall in check, forecasting a mid-year rate of
6.72 to the dollar and a pick-up to 6.60 by year-end.
"Earlier this month Li Daokui, an economist at Tsinghua University
and former member of the PBOC MPC, said foreign reserves needed to
be kept above $3 trillion. We expect tighter exchange controls and
macroprudential measures to enable the authorities to do that and
curb depreciation pressure while cutting interest rates," ING said
in a research note.
China has jolted global markets twice in the last six months by
allowing sudden, sharp slides in the yuan and then intervening
aggressively to stabilize it, sparking confusion over its policy.
Central bank action to temper the depreciation has brought China's
foreign reserves down to about $3.3 trillion from nearly $4 trillion
in the middle of 2014.
(Reporting by Nathaniel Taplin, Samuel Shen and Shanghai and Beijing
newsrooms; Writing by Wayne Cole and Will Waterman; Editing by Kim
Coghill)
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