Global markets rise after China cuts interest rates, bank ratios
Print Edition
STOCKS, oil prices and safe-haven bond yields rose yesterday as a tentative market rebound picked up pace after China cut interest rates and banks’ reserve requirement ratios to kick-start its wavering economy.
US stocks posted their sharpest rally of the year on yesterday, as investors sought out bargains a day after Wall Street’s worst performance in four years.
The Nasdaq composite index led the way with a 3.2 percent rise, boosted by Apple’s 5.7 percent gain to US$108.96. The stock slumped as much as 13 percent on Monday.
In morning trading, the Dow Jones industrial average was up 362.84 points, or 2.29 percent, at 16,234.19, and the S&P 500 rose 46.47 points, or 2.45 percent, at 1,939.68.
On Monday, the Dow briefly slumped more than 1,000 points — its steepest intraday fall ever — and the S&P 500 recorded its worst day since 2011.
The US dollar motored ahead against most major currencies, rising 1 percent against the yen and 0.96 percent against its currency basket as the stimulus boost to China’s economy gave impetus to the case for a near-term interest rate hike in the US.
Global markets were pummeled on Monday, with Chinese shares falling 8 percent, prompting investor calls for remedial action from authorities that grew louder overnight after the Shanghai Composite Index slumped a further 8 percent.
Economists said yesterday’s response sent a clear signal that Beijing, which has stepped in several times this year to keep China’s growth on track, was still willing to intervene.
But as asset prices eased back following the initial euphoria, some questioned whether the measures would help.
“What we need to see to calm investors is positive economic data points out of China, and only when we see that will the rallies be sustainable,” said Xavier Smith, investment director at Centre Asset Management in New York.
As the previous day’s rush for safety reversed, yields on safe-haven US Treasuries scaled back from session highs.
The pan-European FTSEurofirst 300 index gained 3.95 percent. MSCI’s emerging stocks index rose 2.6 percent — its biggest jump in two years after seven days of back-to-back falls.
The stock market gains in Europe, which recouped the bulk of the 5-percent-plus lost the previous day when around 450 billion euros (US$520 billion) was wiped off the FTSEurofirst 300’s value, were also supported by takeover news.
US crude futures traded up 2.3 percent at US$39.10 per barrel, while Brent rose 2.3 percent to US$43.69.
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