China’s central bank, the People’s Bank of China, has announced an interest rate cut of 0.25% on both its lending and deposit rates. The new rates, which take effect tomorrow, will lower the one-year lending rate to 6.31% and the one-year deposit rate to 3.25%.
The US futures market will jump all over this. The only thing that would have made it better is if the Bank of England had done the same thing. Alas, that didn’t happen, as the BoE announced this morning that it would leave interest rates at 0.5% and the asset purchase fund at a total of $506 billion.
US index futures rose sharply following China’s unexpected rate cuts. The DJIA futures index is up 0.54%, while the S&P 500 is up 0.75% and the Nasdaq is up 0.63%. European indexes are also up, led by the UK’s FTSE 100, which is up 1.29% and Germany’s DAX, up 1.02%. Asian exchanges were closed before the announcement was made, with Shanghai down -0.71% for the trading day, while Japan’s Nikkei rose 1.24% and Hong Kong’s Hang Seng rose 0.85%.