China rate cut boosts Asian, European stocks / Photo: © AFP
China rate cut boosts Asian, European stocks
Asian and European stocks rebounded Friday on China's interest rate cut, but US equities continued to slump on fears that sky-high inflation will spark a global downturn.
"Markets have been looking for an excuse to bounce, and a China rate cut provided the reason," IG analyst Chris Beauchamp told AFP.
China's central bank announced it would lower its five-year loan prime rate -- a key interest rate governing how lenders base their mortgage rates -- to 4.45 percent from 4.6 percent.
The news comes in contrast to other major central banks -- like the US Federal Reserve and the Bank of England -- that are raising borrowing costs to combat rocketing consumer prices.
"It isn't much when set against the broader (rate) tightening we are seeing globally, but equities do look a bit stretched to the downside in the short term," Beauchamp added.
The Chinese move sparked optimism among traders that it could boost the world's second-largest economy from its Covid-induced stupor.
"The rate cut announced by the PBOC (People's Bank of China) is obviously good news and is clearly targeted at revitalising the ailing property market which continues to suffer due to the crackdown last year and Covid lockdowns this," said Craig Erlam, senior market analyst at OANDA.
"This could help to revive a hugely important part of the economy," he added, but "whether it's enough to help China hit its 5.5 percent growth target this year is another thing."
Asian stocks closed with gains, as did Europe's main markets although those faded as the day wore on.
Wall Street opened higher, but then sank lower in morning trading.
"Stocks remain on a shaky footing," said market analyst Fawad Razaqzada at City Index and FOREX.com.
He said investors are worried about inflation, interest rate hikes, low economic growth, stagflation, and recession.
"Perhaps most importantly for stocks, the Fed is not there to provide cushion, like before," he added, as the US central bank is raising interest rates to get to grips with inflation.
- Rollercoaster ride -
Markets had taken a beating Thursday on intensifying recession worries.
Wall Street has faced the brunt of selling, suffering its worst batterings in two years over the past couple of sessions.
Downcast earning reports from retailers have heightened market uncertainty at a time of rising interest rates, surging energy prices, China's Covid lockdowns and Russia's ongoing war on Ukraine.
"It has been a rollercoaster ride for markets this week after Thursday's bloodbath when US equities suffered their worse session since 2020 with that negativity reverberating across global stock markets," said Victoria Scholar, head of investment at trading firm Interactive Investor.
Major stock indices have lost huge portions of their value in recent months, with the tech-heavy Nasdaq Composite down 30 percent from the peak it set in November, while the blue-chip Dow is off 15.9 percent.
In Europe, both Paris and Frankfurt stocks are down between 14 and 15 percent, while London's main index has shed a modest 3.9 percent.
- Key figures at around 1530 GMT -
New York - Dow: DOWN 0.7 percent at 31,026.51 points
EURO STOXX 50: UP 0.5 percent at 3,657.03
London - FTSE 100: UP 1.2 percent at 7,389.98 (close)
Frankfurt - DAX: UP 0.7 percent at 13,981.91 (close)
Paris - CAC 40: UP 0.2 percent at 6,285.24 (close)
Hong Kong - Hang Seng Index: UP 3.0 percent at 20,717.24 (close)
Shanghai - Composite: UP 1.6 percent at 3,146.57 (close)
Tokyo - Nikkei 225: UP 1.3 percent at 26,739.03 (close)
Brent North Sea crude: UP 0.4 percent at $112.52 per barrel
West Texas Intermediate: UP 0.4 percent at $112.65 per barrel
Euro/dollar: DOWN at $1.0555 from $1.0588
Pound/dollar: UP at $1.2475 from $1.2467
Euro/pound: DOWN at 84.61 pence from 84.93 pence
Dollar/yen: UP at 127.88 yen from 127.79
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(V.Blanchet--LPdF)
