Financial Times – Thursday 12:25 BST.
A surprise interest rate cut by the People’s Bank of China is supporting growth-sensitive assets.
The FTSE All-World equity index is up 0.2 per cent as the FTSE Eurofirst adds 0.4 per cent and US stock futures move higher to show Wall Street gaining 0.2 per cent at the open.
The move by Beijing came at the same time as the Bank of England confirmed it was increasing its asset purchase programme by £50bn and ahead of an expected 25 basis point reduction in borrowing costs by the European Central Bank.
Together the moves signal that the world’s monetary guardians are becoming increasingly concerned about the health of the global economy.
Earlier in the session, China’s Shanghai Composite had lost 1.2 per cent to sit only 0.2 per cent above its lowest closing level since the start of January.
Steelmakers and coal miners led declines amid weakening demand and falling prices. Indicative of the concerns about slowing growth in the world’s second-largest economy, shares in Sany Heavy Industry extended losses for a fourth day, as the company, China’s biggest machinery maker by sales, cut jobs.
Across the world, national factory and service sector surveys released over the past several days have been disappointing. And with many developed country governments reluctant to worsen budget positions by taking fiscal measures to boost activity, it is central banks that are doing the heavy lifting.
The stimulus measures from China and Europe will likely increase the anticipation in the market that the US Federal Reserve may also introduce further supportive measures when it concludes its next monetary policy meeting at the start of August.
Recent housing data in the US have been slightly more promising but investors were shocked by the latest survey of US manufacturing, which showed factory output fell to a three-year low in June.
And hopes of more Fed largesse will be bolstered if US data over the next few days continue to disappoint.
On Thursday, traders will scan the ADP private sector employment figures for June, the official weekly initial jobless claims numbers and the June non-manufacturing ISM report.
Then on Friday, the always eagerly anticipated US non-farm payrolls report will be published.
Away from all the central bank action, traders are keeping an eye on the eurozone debt market for any indication that the improved mood following last week’s EU summit deal may already be fading.
Spain raised €3bn from the sale of medium and long-term paper on Thursday, an auction that saw good demand but with Madrid again facing unsustainably high borrowing costs. After hitting a three-week low of 6.25 per cent on Tuesday, the yield on the Spanish 10-year note is up 22 basis points to 6.63 per cent in the secondary market.
German Bund yields are down 1bp to 1.46 per cent and Treasuries are off 3bp to 1.59 per cent, a sign that some in the market are sufficiently nervous that they are still seeking perceived havens, even with such low yields on offer.
