Global Markets Surge as China Unveils Plan to Stabilize Stock Market
The world’s second-largest economy, China, has taken bold steps to revitalize its sluggish stock market, sending shockwaves of optimism across global markets. In a move to prop up its economy, China’s central bank has announced plans to support the stock market through share repurchases by companies and major shareholders.
Economic Growth Slows, But Stimulus Hopes Rise
China’s economy expanded at a 4.6% annual pace in the last quarter, down slightly from 4.7% in the previous quarter. Although growth has averaged 4.8% this year, below the official target of about 5%, the slowdown has sparked expectations of increased stimulus efforts from the government. Weakness in the property market has continued to weigh on demand, but Beijing’s latest measures are expected to inject new life into the economy.
Stock Markets Rally as Central Bank Issues Guidelines
The People’s Bank of China has issued guidelines for state banks to provide loans to companies and major shareholders for stock repurchases, with a maximum interest rate of 2.25%. This move has sent Shanghai’s Composite index soaring 2.1% to 3,232.14, while the benchmark for the smaller market in Shenzhen jumped 3.2%. Hong Kong’s Hang Seng index also gained 2.2% to 20,519.78.
Asian Markets React
Tokyo’s Nikkei 225 edged 0.2% higher to 38,798.48, while the Kospi in Seoul shed 0.6% to 2,594.40. Australia’s S&P/ASX 200 gave up 0.9% to 8,283.20. The Taiex in Taiwan gained 1.9% and the SET in Bangkok was up 0.2%. India’s Sensex slipped 0.2%.
U.S. Stocks Hold Steady
Meanwhile, U.S. stocks drifted around their record heights, with the S&P 500 finishing virtually unchanged at 5,841.47. The Dow Jones Industrial Average added 0.4% to 43,239.05, besting its own record set the day before. The Nasdaq composite added less than 0.1% to 18,373.61.
Encouraging Economic Reports Boost U.S. Market
Strong sales reports from U.S. retailers and a decrease in unemployment benefits have bolstered hopes that the economy could make a smooth escape from the worst inflation in generations without a recession. The Federal Reserve’s decision to cut interest rates has also fueled optimism, leading critics to warn that stock prices may be too expensive given the rapid climb.
Global Markets React
The European Central Bank’s decision to cut its main interest rate by a quarter of a percentage point sent stock indexes higher by 1.2% in France and 0.8% in Germany. In other dealings, U.S. benchmark crude oil gained 25 cents to $70.92 per barrel, while the dollar fell to 149.85 Japanese yen from 150.21 yen. The euro rose to $1.0843 from $1.0827.
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