Global stock markets fell Monday as investors responded to the weekend decision from the Chinese monetary authorities to reduce the amount of capital that banks are required to hold, a move that stoked concerns that the world’s number 2 economy is struggling in the face of the tariff dispute with the U.S.
KEEPING SCORE: In Europe, Germany‘s DAX was down 0.9 percent at 12,000 while the CAC 40 in France fell 0.9 percent, too, to 5,310. The FTSE 100 index of leading British shares was 0.6 percent lower at 7,272. U.S. stocks were poised to open lower too with Dow futures and the broader S&P 500 futures down 0.3 percent. Trading on Wall Street is expected to be light as the federal government, bond markets and much of the country observe Columbus Day. However, light liquidity levels have the potential to accentuate moves one way or the other.
CHINA RATE CUT: Beijing injected money into its cooling economy by reducing the level of reserves banks are required to hold. Economists say that should free up some 1.2 trillion yuan ($175 billion) for lending. The central bank told banks to lend more to entrepreneurs. Chinese leaders are trying to shore up economic growth that began to cool after Beijing tightened lending controls last year to rein in a debt boom. A tariff fight with U.S. President Donald Trump has added to downward pressure on growth. After a weeklong holiday, the Shanghai Composite ended its first day back almost 4 percent lower.
ANALYST TAKE: This drives the idea that further retaliatory measures against U.S. trade tariffs will follow,” said James Hughes, chief market analyst at AxiTrader.
US RATES: Also weighing on stocks is the growing expectation that the U.S. Federal Reserve will raise interest rates even further than markets currently expect. The shift in expectations has come after further solid jobs data reduced the U.S. unemployment rate to a near 40-year low of 3.7 percent and comments from Fed Chairman Jerome Powell that the level of U.S. interest rates are a “long way” from holding back economic growth.
ASIA’S DAY: The Shanghai Composite Index tumbled 3.7 percent to 2,716.51 and Hong Kong’s Hang Seng retreated 1.4 percent to 26,201.08. Japanese markets were closed for a holiday. Sydney’s S&P-ASX 200 lost 1.4 percent to 6,100.30 and Seoul’s Kospi was off 0.6 percent at 2,253.83. India’s Sensex declined 0.3 percent to 34,267.77. Jakarta gained while New Zealand, Taiwan and Singapore retreated.
ENERGY: Benchmark U.S. crude tumbled $1.01 to $73.33 per barrel in electronic trading on the New York Mercantile Exchange while Brent crude, used to price international oils, dropped $1.16 to $83.
CURRENCY: The euro dropped 0.4 percent to $1.1478 while the dollar declined 0.3 percent to 113.36 yen.