Asian and European stocks rebounded on Friday as China’s hobby price cut, but US stocks persisted in tumbling on fears that sky-high inflation could trigger an international slowdown.
“Markets were looking for an excuse to rebound, and a rate cut in China provided the target,” said IG analyst Chris Beauchamp.
China’s central bank said it would lower its five-year prime lending rate – a key interest rate governing how lenders base their mortgage rates – to 4.45% from 4.6%.
The news contrasts with other major central banks – such as the US Federal Reserve and the Bank of England – which are raising borrowing costs to combat soaring consumer prices.
“It’s not much compared to the broader (rate) tightening we’re seeing globally, but equities look a bit stretched to the downside in the near term,” Beauchamp added.
The Chinese move has 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 welcome news and is clearly aimed at revitalizing the struggling real estate market which continues to suffer due to last year’s crackdown and Covid lockdowns” , said Craig Erlam, senior market analyst at OANDA.
“It could help revive a hugely important part of the economy,” he added, but “whether it’s enough to help China reach its 5.5% growth target this year is another thing. “.
Asian stocks closed with gains, as did major European markets, although these faded as the day progressed.
Wall Street opened higher but then fell lower in morning trade.
“Equities remain fragile,” said market analyst Fawad Razaqzada at City Index and FOREX.com.
He said investors were worried about inflation, interest rate hikes, weak economic growth, stagflation and recession.
“Perhaps most importantly for equities, the Fed is not there to provide a cushion, like before,” he added, as the US central bank raises interest rates to rein in the inflation.
– Roller coaster ride –
Markets took a beating Thursday on intensifying recession fears.
Wall Street has faced the brunt of the sell-off, taking its worst blows in two years over the past two sessions.
Reports of falling earnings from retailers have heightened market uncertainty at a time of rising interest rates, soaring energy prices, Covid lockdowns in China and the ongoing war in Russia against Ukraine.
“It’s been a roller coaster ride for markets this week following Thursday’s bloodbath when US stocks suffered their worst session since 2020 with this negativity rippling through global equity markets,” said Victoria Scholar, chief investment officer at Interactive Investor.
Major inventory indexes have lost much of their value in recent months, with the tech-heavy Nasdaq Composite down 30% from its peak in November, along with the Dow blue chip is down 15.9%.
In Europe, shares in Paris and Frankfurt are down 14-15%, while the important London index lost a modest 3.9%.
– Key figures around 3:30 p.m. GMT –
New York – Dow: DOWN 0.7% to 31,026.51 points
EURO STOXX 50: UP 0.5% to 3,657.03
London – FTSE 100: UP 1.2% to 7,389.98 (closing)
Frankfurt – DAX: UP 0.7% to 13,981.91 (closing)
Paris – CAC 40: UP 0.2% to 6,285.24 (closing)
Hong Kong – Hang Seng Index: UP 3.0% to 20,717.24 (closing)
Shanghai – Composite: UP 1.6% to 3,146.57 (closing)
Tokyo – Nikkei 225: UP 1.3% to 26,739.03 (closing)
Brent from the North Sea: +0.4% to 112.52 dollars a barrel
West Texas Intermediate: UP 0.4% to $112.65 a barrel
Euro/dollar: DOWN to $1.0555 vs. $1.0588
Pound/dollar: UP to $1.2475 from $1.2467
Euro/pound: DOWN to 84.61 pence vs. 84.93 pence
Dollar/yen: UP to 127.88 yen from 127.79