Global Stocks Launch Higher After Chinese Easing Move
By Caitlin Ostroff
Global stock markets got off to a strong start on the first
trading day of the year after China's central bank announced a
fresh dose of monetary policy easing.
U.S. futures were higher and stock markets in Asia and Europe
were broadly up Thursday. Hong Kong's benchmark Hang Seng Index
rose 1.3% and China's Shanghai Composite gained 1.2%.
The moves came after the People's Bank of China on New Year's
Day lowered the amount of reserves banks need to keep on hold at
the central bank, essentially freeing up cash for lending into the
world's second-largest economy.
"Even if there is bad news you see that central banks have put
quite a solid foundation under the market," said Bas van Geffen, a
quantitative analyst at Rabobank. "Whatever stimulus the PBOC does
in China means the economy will do better, which is good for
European exporting firms."
Futures tied to the S&P 500 were up 0.6%. Stocks in Europe
were broadly higher with the Stoxx Europe 600 and the U.K.'s FTSE
100 up 1% and the French CAC 40 rising 1.3%.
The PBOC announcement reinforces expectations that Beijing will
follow through on promises to boost its economic growth in
Nathan Chow, senior economist at DBS Bank in Hong Kong said the
ratio cuts would reduce funding pressure on banks and property
companies, seen as weak spots in the financial system. He expects
two more such cuts later this year.
Figures on manufacturing activity published Thursday meanwhile
showed China's factories slowed slightly in December but remained
in expansionary territory for the fifth straight month. European
manufacturing data came in better than expected but continued to
show contraction in the industrial part of the economy.
Markets were further buoyed by renewed hopes of lessening
U.S.-China trade tensions. On Tuesday, after European and Asian
markets closed ahead of the new year, President Trump said he would
sign a phase-one trade deal with China on Jan. 15.
"We've also had some pretty good news over the past few days
with the trade deal," Mr. van Geffen said. "There appears to be
some progress there."
Gains in European stocks were led by the banking and basic
resources sectors, both of which stand to benefit from a pickup in
European banks were also aided by a continued rise in government
bond yields and a steepening yield curve. Germany's largest
lenders, Commerzbank and Deutsche Bank, were both up more than 5%.
Banks pay depositors based on short-term rates, and lend based on
long-term rates, so they are more profitable when the difference
between the two widens, as it has in recent weeks.
Germany's 10-year bund yielded minus 0.203% on Thursday,
according to Tradeweb, up from minus 0.347% a month ago and
hovering near its highest level since May 2019. The U.S. 10-year
Treasury yield rose as high as 1.946% Thursday, its highest since
Aerospace giant Airbus rose 2.9% after Reuters reported it beat
a yearly production target.
--Joanne Chiu in Hong Kong contributed to this article.
Write to Caitlin Ostroff at email@example.com
(END) Dow Jones Newswires
January 02, 2020 08:58 ET (13:58 GMT)
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