China rate cut lifts Asian markets, Eurogroup in focus
Asian markets reacted to news from China that its central bank cut rates by 25 basis points to 5.1 percent, making it the third rate cut in six months. The deposit rate was also lowered by a quarter point to bring it to 2.25 percent.
The move by the People’s Bank of China on Sunday was taken positively by the markets as a recent spate of weak data caused concerns that the world’s second largest economy is facing challenges in growth. Deflation risks are also rising as Saturday’s CPI number was lower-than-expected at 1.5 percent.
Thus, the loosening of monetary policy by the PBOC will help boost the economy.
The Shanghai Composite responded to the rate cut announcement with a 1 per cent climb, following a 5.3 per cent plunge last week.
The big focus of the markets later on Monday will be the Eurogroup meeting in Brussels. On top of the agenda will be Greece which is in negotiations with its creditors on a deal so that it would receive billions of euros in much needed bailout funds. However, no breakthrough is expected at today’s talks.
A major sticking point is reforms to Greece’s pension system, something that has put the country at odds with European creditors. Greece’s left-wing government has said it will not break anti-austerity electoral promises,.
However, Greek ministers says they will honour a payment of 750m euros to the IMF due on Tuesday. Greece has until June to agree a new reform deal with its creditors.
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