Nov 23, 2014 11:00 PM
Asian stocks gain after China rate cut
The Associated Press
BEIJING (AP) Asian stocks rose Monday after China's surprise interest rate cut as investors looked ahead to European inflation data due out this week and OPEC meeting to discuss oil production levels.
KEEPING SCORE: China's Shanghai Composite Index jumped 1.7 percent to 2,529.83 points and Hong Kong's Hang Seng surged 1.8 percent to 23,862.69. Tokyo's Nikkei 225 gained 0.3 percent to 17,357.51 and Seoul's Kospi added 0.5 percent to 1,974.48. Sydney's S&P ASX 200 added 1 percent and Singapore also gained.
CHINA'S RATE CUT: Beijing's surprise rate cut Friday, its first in more than two years, was seen as a sign of increasing official concern after economic growth tumbled to a five-year low of 7.3 percent in the latest quarter. The central bank's move would cut financing costs for borrowers and could help to boost business sentiment and willingness to invest. Beijing has tried to avoid an across-the-board stimulus, using targeted measures to shore up individual industries instead, but analysts say the rate cut is an acknowledgement that isn't working well enough. They expect at least one more rate cut and possibly other steps to shore up flagging growth.
ANALYST'S TAKE: "Although central bank stimulus is helpful, it's shooting into the headwind of oversupplied markets and, in the case of Europe, ongoing structural problems," said Ric Spooner of CMC Markets in a report. "Rate cuts in China are likely to boost activity over the longer term, especially if these initial cuts turn out to the first in a series. However, at this stage, cheaper borrowing rates will need to overcome the natural caution that flows through an economy when the property market is oversupplied and housing prices are falling."
EUROPE: European core inflation for November, due out this week, was expected to show a deceleration despite efforts to stimulate economic activity. European Central Bank President Mario Draghi caused a stir when he said Friday the bank is willing to "step up the pressure." If current efforts do not achieve the desired effect, Draghi said the ECB could "broaden even more the channels through which we intervene." Traders took that as a sign the central bank for the 17 eurozone countries might soon start buying government bonds.
OPEC: Traders were watching a meeting Thursday of the Organization of Petroleum Exporting Countries for a possible agreement to cut production in order to shore up prices. The price of crude has tumbled by 25 percent over the past year as producers kept output stable while demand in Europe and other markets weakened. Lower output might help to push up prices, which would mean bigger revenues for producers but raises the risk of a drag on growth in fragile importing economies. Iran's government-run Mehr news agency said its envoys will press at the meeting in Vienna for an agreement to stabilize prices.
ENERGY: Benchmark U.S. crude added 11 cents to $76.62 per barrel in electronic trading on the New York Mercantile Exchange. The contract gained 66 cents on Friday to close at $76.51. Brent crude, used to price international oils, added 15 cents to $80.51 after rising $1.03 on Friday to $80.36.
CURRENCY: The dollar gained to 117.82 yen from Friday's 117.79 yen. The euro held steady at $1.23.