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Market round-up: shares edge up as China cuts rates

By Amanda Cooper

China central bank cuts key lending rate to shield economy from the coronavirus

European shares rose modestly, buoyed by optimism that China will shore up its economy against the coronavirus after the central bank took steps to ease monetary policy. Meanwhile, gold and oil retreated after their recent rallies.

Chinese president Xi Jinping hinted at fresh stimulus measures for the Chinese economy as business and banks continue to struggle with the effects of the Covid-19 outbreak.

Xi was quoted in the Chinese communist journal as saying that central and local governments “still need to deliver this year’s economic and social targets”, targets that will likely be out of reach in the absence of further policy support.

Elsewhere the People’s Bank of China cut the rate on its medium-term financing facility by 10 basis points to 3.15 per cent. Although that affects only some 200 billion yuan ($28.6bn) directly, the facility is a reference rate for the Chinese interbank market.

The dollar traded broadly steady against other major currencies, holding around its highest in four months.

“This story seems to be keeping the FX markets in a holding pattern as it simultaneously prevents a recovery in risk and a substantial flight-to-safety,” ING forex analysts said in a daily note. “The dollar appears well positioned to remain the currency of choice this week, especially as concerns about the US economy continue to mount.”

The FTSE 100 ended the day up 0.3 per cent at 7,433.25 points, led by home improvement retailer Kingfisher, which rose by more than 2.4 per cent. This followed a report from online estate agent Rightmove that showed average selling prices for houses coming on to the market neared record-highs this month.

US markets were shut for the Presidents’ Day public holiday and due to reopen on Tuesday.

Gold eased back from last week’s seven-week highs, after the PBOC lowered rates. The price has risen by more than 4 per cent so far this year, as investors have sought perceived safe havens in light of the potential damage to the global economy of the coronavirus.

Spot gold was last down 0.13 per cent at $1,581 an ounce. The price hit a seven-year high above $1,600 an ounce in early January, just as the spread of the coronavirus accelerated.

Oil gained around 0.12 per cent on the day to trade just above $57.40 a barrel. Crude has fallen by nearly 20 per cent this year, as the virus has shuttered factories and shops and put entire Chinese cities on lockdown, cutting energy demand by 20 per cent.

The International Energy Agency on Friday forecast the first contraction in global oil demand in the first quarter of this year since the 2009 financial crisis.

In its monthly oil market report, the IEA said global oil demand will fall by 435,000 barrels per day in the first three months of the year.

“Global oil demand has been hit hard by the novel coronavirus (Covid-19) and the widespread shutdown of China’s economy,” the agency said. “Demand is now expected to fall by 435,000 bpd year-on-year in 1Q20, the first quarterly contraction in more than 10 years.”

On the crypto market, Bitcoin was down by more than 2 per cent around $9,656, while smaller rival Ripple was down by more than 4 per cent at 28.35 cents and Ethereum was up 2 per cent at $258. Ethereum is one of the star crypto performers so far this year. The price has more than doubled since the last week of December and, in the past week, Ethereum hit its highest in seven months.

FURTHER READING: Ether and Ethereum: what is the difference?

FURTHER READING: Covid-19: Chinese finance minister announces shift in fiscal policy

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