China central bank cuts reserve requirement by half a point

Feb 29, 2016, 20:29

On Monday, Chinese stocks fell to almost their lowest point in 14 months, while the yuan reached its weakest level in about three weeks against the dollar.

MARKET INSIGHT: "Following the optimism from traders on Friday ahead of the G-20 Summit, it looks like a case of the Monday morning blues after the influential group of ministers and bankers failed to come up with any concrete measures to boost growth", said Stephen Innes, senior foreign exchange trader at OANDA.

The central bank said it lowered the rate to guide stable and appropriate growth in credit and create appropriate monetary and financial conditions for supply-side structural reform, according to a statement on its website. The interest rates banks have to pay for those central-bank facilities are at least 0.6 percentage point, or 1 percentage point higher than the rates on official deposit reserves, estimate Zhou Hao, a senior economist at Commerzbank AG.

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Japan's Nikkei Stock Average NIK, +0.41% was last up 0.3%, Australia's S&P/ASX 200 XJO, +0.47% gained 0.5% and South Korea's Kospi SEU, -0.04% was flat.

Liquidity has tightened as the central bank buys yuan to support the currency - also known as the renminbi - which has weakened on worries over the slowing growth.

The decision also came ahead of the opening this weekend of the annual session of the National People's Congress (NPC), China's rubber stamp parliament, which will unveil economic targets for 2016 and a five-year development plan. USA oil prices were tipping slightly lower. The Standard & Poor's 500 index lost 0.2 percent to 1,948.05 and the Nasdaq composite added 0.2 percent to 4,590.47.

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A record-breaking 13.8 C was recorded at Pearson International Airport Sunday, making it the warmest February 28 on record. At the onset, meteorologists said, precipitation will be a mix of rain or sleet before transitioning quickly to all snow.

It may have been a leap day, but most markets in Asia did anything but as they closed February down on Monday. Brent crude was last up 0.93% to $35.43 per barrel, while West Taxas Intermediate was down 0.12% to $32.74.

In the currency market, the yen maintained its strength against the dollar at the 113 handle, with the pair trading down 0.54% at 113.38.

Meanwhile EURUSD still digging in around 1.0900 but with euro generally softer all round.

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