China’s Christmas
Day interest rate rise and a severe blizzard that blanketed the
northeastern United States left U.S. share prices weak and the U.S.
dollar lower in thinly traded markets on Monday.
The Dec. 25 rate
increase by the People’s Bank of China was the second in just over two
months, and while the timing just before year-end may have been a
surprise, the move itself was not.
European stock
markets fell in response to China’s move, although with the UK on
holiday until Wednesday, trading activity was limited.
Global share prices
were mostly lower on Monday but are still hovering near highs of more
than two years. Commodity prices were mixed, with oil off a 26-month
peak, gold down marginally but grain prices generally stronger.
The euro rose to its best levels in a week against the greenback.
Shanghai’s
benchmark stock index SSEC fell 1.9 percent on the day, down 15.127
percent year-to-date as investors have been anticipating tighter
lending policies by the central bank in an effort to slow rising
inflation. “In the long run, this is going to be
healthy for the Chinese economy, but the instinctive market reaction is
that this is going to be bad for global demand, giving investors a
reason to sell off equities,” said Quincy Krosby, market strategist
with Prudential Financial in Newark, New Jersey.
In mid-morning New
York trade, the Dow Jones industrial average .DJI fell 29.40 points, or
0.25 percent, at 11,544.09. The Standard & Poor’s 500 Index .SPX
lost 1.07 points, or 0.09 percent, at 1,255.70. The Nasdaq Composite
Index .IXIC dropped 8.24 points, or 0.31 percent, at 2,657.36.
In Europe, the FTSEurofirst 300 .FTEU3 ended 0.87 percent lower at 1,137.49.
The MSCI index of
Asian stocks outside Japan .MIAPJ0000PUS rose 0.04 percent with Japan’s
Nikkei N225 closing up 0.75 percent, extending its recent
outperformance in Asia.
The MSCI All
Country World index .MIWD00000PUS dipped 0.21 percent, and the Thomson
Reuters global stock index .TRXFLDGLPU lost 0.26 percent.
China’s central
bank said on Saturday it would raise the benchmark lending rate by 25
basis points to 5.81 percent and lift the benchmark deposit rate by 25
basis points to 2.75 percent.
On Monday, the PBOC
took aim at inflation once again by saying prudent monetary policy
would be helpful in combating price pressures and asset bubbles.
Euro gains
The normally thin
post-holiday trading was made more so by a severe blizzard that shut
down some commuter transport networks, forcing New York trading desks
to operate with skeletal staffing.
The euro rose after shaking off losses below its 200-day moving average — $1.3087, according to Reuters data.
A move below that
level is usually indicative of more losses. While fears that a
euro-zone debt crisis could spread have pushed the euro below the
200-day moving average in five of the last six sessions, it has
rebounded swiftly each time. It was last up 0.15 percent at $1.3135
EUR=.
“With no economic
news, we’re focusing on these technical factors, and that push above
the 200-day average has been a catalyst for the euro,” said Omer
Esiner, strategist at Commonwealth Foreign Exchange in Washington. “And
with London off and the blizzard in New York, things are very subdued.”
The dollar rose 0.07 against the yen at 82.92 JPY=, after dropping to a
three-week low in Asian trading hours.
The Australian
dollar fell as low as $0.9987, though it clawed back to $1.0025 AUD=,
nearly flat on the day. The currency hit a six-week high of $1.0067
last week.
U.S. Treasuries prices trimmed losses after the auction of $35 billion in two-year notes at 1 p.m. (1800 GMT).
Benchmark 10-year
notes reversed course to trade 1/32 of a point in higher price, pushing
the yield down to 3.39 percent US10YT=RR.
Oil prices pulled
back from a 26-month high in light of China’s action, which countered
the influence of severe cold weather in the United States and Europe.
U.S. light sweet
crude fell 0.46 percent, to $91.09 per barrel, and spot gold prices
XAU= fell $4.71, or 0.34 percent, to $1379.50.
