China rate cut gives markets a big boost

Source: AP-EXCITE

By PAN PYLAS

LONDON (AP) — A surprise interest rate cut in China and another hint by the head of the European Central Bank that further stimulus is possible sent stock markets soaring Friday.

KEEPING SCORE: In Europe, Germany's DAX jumped 1.9 percent to 9,659 while the CAC-40 in France rose the same rate to 4,313. The FTSE 100 index of leading British shares was 0.9 percent higher at 6,741. Wall Street was poised for a solid opening, too, with Dow futures and the broader S&P 500 futures up 0.7 percent.

CHINA RATE CUT: In an after-hours statement, China's central bank cut the interest rate on its one-year loans to financial institutions by 0.4 percentage point to 5.6 percent. The surprise reduction comes in the wake of recent figures showing that the country's annual rate of economic growth slowed to a five-year low of 7.3 percent last quarter.

JAPAN CONNECTION Many analysts think a key motivation behind China's rate cut has been the recent sharp fall in the value of the Japanese yen, which is likely to impact on China's exports. The yen has been in retreat for much of this year in the wake of the Bank of Japan's stimulus efforts, which are designed to boost growth and get inflation higher. Figures this week saw Japan unexpectedly sliding back into recession in the third quarter, prompting speculation that the central bank would do more stimulus. As such, the yen's decline continued and on Thursday it fell to a seven-year low against the dollar. On Friday, the dollar was down 0.1 percent at 117.97 yen, short of Thursday's multi-year high just below 119 yen.

FULL story at link.



Read more: http://apnews.excite.com/article/20141121/financial_markets-05c66d7220.html