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Stocks Struggle as China Rate Cut Sends Oil Down

Stocks Struggle as China Rate Cut Sends Oil Down
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FILE PHOTO – People walk past an electronic screen showing Japan’s Nikkei stock price index inside a conference room in Tokyo, Japan June 14, 2022. REUTERS/Issei Kato

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  • https://tmsnrt.rs/2zpUAr4
  • Nikkei rises, S&P 500 futures fall
  • PBOC cuts key rates, China data misses forecasts
  • Eyes in minutes fed, profit

LONDON, Aug 15 (Reuters) – Global stocks struggled to advance on Monday as investors digested news of an unexpected cut in Chinese interest rates as data pointed to faltering growth in the world’s second-largest economy. , causing oil prices to fall almost 2%.

Weaker US stock index futures also weighed on sentiment, while a steadier dollar hit gold.

The MSCI index for all countries (.MIWD00000PUS) it was only slightly firmer, a one-month advance that reduced the benchmark’s decline for the year to around 13%.

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China’s central bank cut key lending rates to revive demand as data showed the economy unexpectedly slowed in July, with factory and retail activity stifled by Beijing’s zero-COVID policy and a housing crisis. . read more

So far, investors have been grappling with how much higher the US and European central banks will raise rates when they meet next month.

Hopes for smaller rate hikes on signs that US inflation may be peaking helped Wall Street post its fourth straight week of gains on Friday.

Gains on Wall Street and steady growth figures from Japan helped the Nikkei (.N225) the stock average in Tokyo jumps to its highest level in more than seven months.

“I think China is a different situation than the rest of the world. They have a self-imposed recession that they have created from the zero COVID policy,” said Patrick Armstrong, chief investment officer at investment house Plurimi Group.

“I think it will be driven by the Fed if there’s another leg down in the markets. I think quantitative tightening will start in earnest in September and that’s going to take liquidity out of the market,” Armstrong said.

The markets continue to imply that there is a 50% chance that the Fed will hike 75 basis points in September and that rates will rise to 3.50-3.75% by the end of the year.

The Fed is to release minutes on Wednesday from its latest rate-setting meeting, but investors’ hopes that they will show the central bank starting to pivot on rate hikes could be dashed.

“I don’t think (Fed Chairman) Powell is going to say that, I don’t think the minutes indicate that,” Armstrong said.

In Europe, the STOXX stock index of 600 leading companies rose 0.13% to 441.43 points, still down about 10% on the year.

Federal Reserve Rate Stocks and Futures

US FUTURES FACILITY

S&P 500 and Nasdaq futures were down about 0.5% after last week’s gains.

Earnings from major retailers, including Walmart (WMT.N) and target (TGT.N)will be examined for signs of declining consumer demand.

Chinese interest rate cut failed to stop Chinese blue chips (.CSI300) declining 0.13%, while the yuan and bond yields also fell. read more

Geopolitical risks remain high with a delegation of US lawmakers in Taiwan for a two-day trip. read more

The bond market still seems doubtful that the Fed can manufacture a soft landing, with the yield curve deeply inverted. Two-year yields of 3.27% are well above those on 10-year bonds, which were trading at 2.86%.

Those returns have supported the US dollar, although it fell 0.8% against a basket of currencies last week as risk sentiment improved.

But on Monday, the dollar regained some balance, with the euro falling 0.2% against the dollar to $1.02345 after bouncing 0.8% last week. Against the yen, the dollar stabilized at 133.51 after losing 1% last week.

“Our feeling remains that the dollar rally will resume before too long,” said Jonas Goltermann, senior economist at Capital Economics.

Gold was down 0.8% at $1,786, losing almost all of its 1% gains last week.

Oil prices fell as disappointing data from China added to concerns about global fuel demand.

The head of the world’s top exporter, Saudi Aramco, said it was ready to ramp up output as production at several offshore platforms in the US Gulf of Mexico resumes after a brief halt last week.

Brent fell 1.8% to $96.35, while US crude fell 1.9% to $90.34 a barrel.

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Information from Wayne Cole; Edited by Sam Holmes, Raju Gopalakrishnan, and Ed Osmond

Our standards: The Thomson Reuters Trust Principles.

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