Global Markets Decline on Profit-Taking Despite China’s Interest Rate Cuts
October 2, 2024
New York, United States — Amid a backdrop of profit-taking and surging oil prices, most major stock markets experienced declines on Monday. Investors are deliberating over China’s recent interest rate cuts designed to reinvigorate the world’s second-largest economy.
Friday’s record-high session on Wall Street did not carry its momentum into the new week, as global equity markets largely trended downward. According to Patrick O’Hare, a Briefing.com analyst, this trend stems from a position of strength in main indices, prompting some investors to sell off after weeks of significant gains.
Meanwhile, geopolitical concerns and uncertainties surrounding the upcoming U.S. elections have propelled gold to a new all-time high, underscoring its status as a haven investment. Yet, as O’Hare points out, investor sentiment has not reached a point of panic.
Oil prices, which saw a dramatic drop of over eight percent last week, were bolstered by unrest in the Middle East and the prospect of increased demand from China, the globe’s leading oil importer. Susannah Streeter, head of money and markets at Hargreaves Lansdown, notes that China’s move to cut key interest rates aims to stimulate borrowing and spending, potentially reviving its troubled property market. However, there are still expectations that additional fiscal interventions will be necessary.
China’s central bank announced on Monday that it has reduced two critical interest rates to their lowest-ever levels, as part of efforts to achieve a 5% annual economic growth target. This comes after quarterly figures released last week depicted China’s slowest pace of economic growth since early 2023, though still exceeding forecasts.
Since last month, Beijing has been proactive, implementing measures such as rate cuts, easing home-buying regulations, and supporting equity markets. Although these announcements initially triggered robust gains in mainland and Hong Kong stocks, a series of uninspiring press conferences with sparse details led to some rollbacks of these gains. Moody’s Analytics described the situation as a "rollercoaster" for markets due to the unpredictability of policy announcements.
In the oil sector, Trade Nation analyst David Morrison suggests that the market’s momentum remains negative. Last week, both OPEC+ and the U.S. Energy Information Administration once again downgraded their oil demand growth forecasts, citing China’s economic challenges as a major factor for their bearish outlook.
On the foreign exchange front, the U.S. dollar appreciated against other major currencies. Morrison explained, "The U.S. dollar continues to find favor as probabilities shift towards a deceleration in Federal Reserve monetary policy easing, alongside expectations of faster rate cuts from the European Central Bank and the Bank of England."
As global markets navigate this complex landscape, investors remain attentive to geopolitical developments, macroeconomic indicators, and central bank policy signals that are likely to shape the financial and economic environment in the coming months.
