NEW YORK, Aug 16 ― Global equities and the US dollar advanced yesterday despite weaker-than-expected economic data in China that prompted its central bank to cut its lending rate, stoking concerns of a global recession.
The People's Bank of China unexpectedly cut key interest rates after the world's second-largest economy reported July data on industrial output and retail sales that missed most analyst estimates.
China's strict Covid-19 restrictions have hobbled activity at its main manufacturing hubs and popular tourist spots, including Shanghai, even as a deepening downturn continues in the property market.
Markets reversed earlier session losses and were slightly higher. The MSCI world equity index, which tracks shares in 50 countries, was up 0.23 per cent.
Overnight in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan had closed 0.34 per cent lower.
“You've been seeing a slowing trend in China amplified by the lockdowns,” said Tom Plumb, portfolio manager at Plumb Balanced Fund in Wisconsin.
“The credit problems they've had especially with real estate developers, that's going to tie their hands for how aggressive they can go back to stimulation. But I think it's a sign they're going to try to be more accommodative.”
The US dollar strengthened following news of the Chinese central bank action amid disappointing data. The dollar index, which measures the greenback against six peers, rose 0.785 per cent, with the euro down 0.97 per cent to US$1.0158 (RM4.54).
Oil prices dropped by more than 3 per cent on demand concerns after the weak data from China, one of the largest importers of crude. Brent crude futures settled down 3.1 per cent to US$95.10 a barrel, while US West Texas Intermediate crude closed at US$89.41, down 2.9 per cent.
On Wall Street, major indexes climbed, reversing earlier session losses, following four straight weeks of gains and a likely moderation on US Federal Reserve interest rate hikes after a slowdown in inflation.
The Dow Jones Industrial Average rose 0.42 per cent to 33,903.57, the benchmark S&P 500 gained 0.37 per cent to 4,296.09 points, and the Nasdaq Composite added 0.59 per cent to 13,123.89.
US Treasury yields were slightly lower as the market continued to assess to what extent a slowdown in inflation could impact the US Federal Reserve's monetary tightening policies.
Benchmark 10-year Treasury yields were down to 2.795 per cent from a 2.849 per cent close last week. Two-year note yields fell to 3.1988 per cent from 3.257 per cent.
Gold fell over 1 per cent to its lowest in a week yesterday amid sharp declines across precious metals due to a stronger dollar, with concerns over further rate hikes by the US Federal Reserve adding to pressure on bullion.
Spot gold dropped dropped 1.3 per cent to US$1,778.53 an ounce, while US gold futures fell 1 per cent to US$1,781.40 an ounce. ― Reuters