How the Markets See China Rate Cut and Bank Reserve Requirement Cut

China has decided to respond to the major market concerns out of Shanghai. The move has bolstered exchange levels, although some of the moves may feel a bit muted compared to more recent actions.

The People’s Bank of China lowered its benchmark lending and deposit rates by 0.25%, and it also lowered its bank reserve requirement ratio by 0.5% and removed its ceiling on most bank deposits. Another move was to cut the bank reserve requirements for rural banks by a half-point as well.

What investors and market participants will want to consider here is that this effort marks the fifth rate cut by China’s central bank since November. This is the third such effort to trim the reserve requirement ratio in 2015.

This move follows another 7.6% drop in the SSE Composite in Shanghai, down to 2,964.97. In short, China wants to lower its fallout in the markets, likely both at home and elsewhere in its trading partner nations. Elsewhere, market moves were seen as follows:

  • The Nikkei 225 in Japan was down almost 4% to 17,806 and the Hang Seng in Hong Kong was up 0.7% to 21,405.
  • The FTSE in London was last seen up 2.4%, the DAX in Germany was up 2.7% and the CAC in France was up 3.1%.
  • While the S&P 500 futures were last seen up 58 points, the Dow Jones Industrial Average futures were up 477 points.

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