China kicked off 2020 with a belated Christmas present for the markets, the effects of which were still being felt on Thursday.
Following on from 3 cuts in 2019, Beijing announced it will slash the country’s reserve requirement ratio by a further 50 basis points to 12.5% from January 6th. That reduces the amount of capital banks need to hold in reserve, in turn freeing up more funds for economy-supporting loans and the like.
That this comes after the ‘phase one’ trade agreement with the USA – set to be signed on January 15th – caused the markets to have a very merry start to the New Year. It also meant investors could choose to ignore a worsening Caixin manufacturing PMI of 51.5, against the previous month’s 51.8.
The FTSE, which struck 7650 towards the end of last year before tumbling at its close, added 0.8%, lifting back to 7600 in the process. The index was helped by sterling’s 0.3% decline against the dollar and euro alike, the currency feeling the pressure now that we are less than one month away from leaving the EU. The pound will be hoping for a better than forecast UK manufacturing PMI to act as a bit of reassurance.
The DAX was particularly giddy, rocketing towards 13300 following a 190 point climb, while the CAC crossed 6020 as it rose 0.9%. Turning to this afternoon and the Dow Jones is looking to hit 28650 once again courtesy of an 80 point increase.
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