China’s stocks and bonds rose yesterday, catching up with gains globally in the wake of the central bank cutting interest rates late on Friday for a sixth time in less than a year to try to spur growth.
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WALL STREET: US stocks rose Friday after strong earnings from big-name technology companies.
“These moves by the ECB and China are raising speculation that the Bank of Japan (BoJ) will act later on this week as well”, Sumitomo Mitsui Asset Management senior strategist Masahiro Ichikawa said.
High-risk currencies receded against the US dollar as investors’ unease over the Chinese economy trumped expectations for USA interest rates to stay at record lows into 2016. Microsoft vaulted to a 15-year high, while Amazon and Google’s parent company Alphabet closed sharply higher.
“The rate cuts will benefit the stock market and whet risk appetite”, said a research note from Shanghai-based Guotai Junan Securities Co Ltd.
The removal of the rate ceiling should be followed by the establishment of a new policy rates and reforms that make market participants more rate-sensitive and the transmission mechanism more effective, said Zhang Wenlang, an analyst with CITIC Securities.
He added, “The market is expecting more of the same from China going forward as the domestic economy continues to struggle despite the succession of rate cuts”.
China’s one-year lending rate was cut to 4.35 percent from 4.6 percent, the People’s Bank of China said on its Web site on Friday, while the one-year deposit rate is set to fall to 1.5 percent from 1.75 percent.
The Shanghai Composite index gained 0.7% to 3,437.03 points while the Hang Seng index in Hong Kong added 0.2%.
The benchmark German two-year yield fell further to minus 0.345 percent.
China’s premier has said the country’s target for economic growth is not set in stone as the leadership in Beijing prepare to meet and prioritise economic and social goals for the next five years. A few analysts say official figures overstate growth and the true rate might be as low as 4 percent.
A four-day meeting of China’s Communist Party kicks off Monday, during which leaders are expected to approve an economic blueprint for scaling back the role of the state over the next five years.
As negative yields undermine the attraction of holding the euro, traders pushed it to a 2 1/2-month low of $1.0989.
Gold prices were was up 0.1% at $1164.20 a troy ounce.
Chinese stocks rebounded 10 percent this month as investors lifted bullish bets to a two-month high and the government cut borrowing costs to bolster the economy.
The party is calling for massive fiscal and monetary stimulus to boost growth.
Mining giant BHP Billiton fell marginally and rival Rio Tinto rose 0.8%, while oil & gas producer Oil Search advanced 2%.
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Brent futures stood at $44.62, little changed so far this week after having fallen 5.6 percent last week.
