Spreadex Market Update
PBOC rate cut and robust US open ensure Western gains continue
It marked the fifth rate cut by the PBOC since November, and came after reports this morning that Chinese policymakers were ready to step back from intervening in the markets. Well, it appears those reports were only half correct; whilst it seems unlikely that the Shanghai Composite will be receiving a cash injection any time soon (though, who knows? Remember the ‘one-off’ yuan depreciation?) the government is still trying to mitigate the consequences of having both a slowing economy AND a value-haemorrhaging stock market.
There were a few other comments of interest surrounding the rate cut; Yao Yudong, head of the People's Bank of China's Research Institute of Finance reportedly blamed the Fed’s intention to raise rates in September for the market volatility, before the PBOC even more audaciously claimed that it has ‘perfected the exchange rate’ between the yuan and dollar.
Even if the Western markets have used the momentum from this rate cut to reverse much of yesterday’s declines (if not those losses that came at the end of last week), it remains to be seen whether the latest moves by the Chinese government will be enough to appease those Chinese investors who have been abandoning the markets in droves.
With the FTSE, DAX and CAC all showing no real signs of slowing down their rebound, the US markets joined the fray with a similarly robust open this afternoon. The Dow Jones jumped 300 points after the bell, with only a minor dip caused by the better than expected flash services PMI and the 7 month high in consumer confidence, the data carrying less weight now that a September lift-off looks unlikely.
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