Global stock prices were mostly lower on Tuesday following a smaller-than-expected rate cut in China. Asian stock indexes were mostly down, and European and US stock indexes also fell.
The People’s Bank of China cut its benchmark interest rate by 10 basis points, which is lower than the anticipated 15 basis point cut. This move suggests a slower-than-expected recovery of the world’s second-largest economy from the pandemic. The five-year lending rate, used to set mortgage rates, was reduced from 4.3% to 4.2%, while the one-year lending rate, a reference for corporate loans, was cut from 3.65% to 3.55%.
China’s central bank had already cut interest rates twice last week and injected billions of yuan into financial markets due to signs of sluggish growth in the country’s economy.
In addition to the rate cut, Chinese e-commerce giant Alibaba announced the unexpected replacement of its chairman and chief executive officer, Daniel Zhang. Joseph Cai will assume the position of Chairman of the Board of Directors, and Eddie U. will become the new Chief Executive Officer. This news led to a 1.5% drop in Alibaba’s share price on the Hong Kong Stock Exchange and a 4.5% drop on the New York Stock Exchange.
The impact of these developments was felt in global markets. The Dow Jones Industrial Average fell 0.7% to 34,053.87, the Standard & Poor’s 500 fell 0.5% to 4,388.71, and the Nasdaq Composite fell 0.2% to 13,667.29 points.
In Europe, London’s FTSE 100 fell 0.3% to 7,569.31, Frankfurt’s DAX fell 0.6% to 16,111.32, and Paris’ CAC 40 fell 0.3% to 7,294.17 points.
Commodity prices were also affected. WTI crude oil fell 1.0% to $70.50 a barrel on the New York Stock Exchange, while the price of “Brent” crude oil on the London exchange decreased by 0.3% to $75.90 per barrel. On the Dutch exchange “Title Transfer Facility” (TTF), the price of natural gas rose by 10.92% to 38.71 euros per megawatt hour.
Currency markets also experienced fluctuations. The euro was down from $1.0921 to $1.0918 per euro, the British pound was down from $1.2792 to $1.2766 per pound, and the dollar was down from 141.98 against the Japanese yen to 141.40 yen per dollar. The euro rose against the British pound from 85.38 to 85.50 pence per euro.
These developments highlight the impact of Chinese rate cuts and leadership changes on global stock prices and financial markets. Investors will continue to monitor the situation in China and its potential effects on the global economy.
How did the smaller-than-expected rate cut in China impact global stock prices on Tuesday?
Global stock prices experienced a decline on Tuesday due to a smaller-than-expected rate cut in China. Asian stock indexes, as well as European and US stock indexes, were mostly down as a result. The People’s Bank of China reduced its benchmark interest rate by 10 basis points, which was lower than the anticipated 15 basis point cut. This move indicates that the world’s second-largest economy is recovering from the pandemic at a slower pace than expected. In particular, the five-year lending rate, which is used to determine mortgage rates, was decreased from 4.3% to 4.2%. Additionally, the one-year lending rate, which serves as a reference for corporate loans, was cut from 3.65% to 3.55%.
The global stock market seems to be feeling the pinch following China’s smaller-than-expected rate cut. It will be interesting to monitor how this decision impacts the market sentiment in the upcoming days.