# Stocks struggle as China rate cut sends oil tumbling
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-08-15
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Global Shares Struggle as Chinese Interest Rates Cut Sparks
Meta Description: Investors assess impact of Chinese rate cut on faltering economy, as US futures weaken. Market uncertain amid Fed rate hike speculations.
URL: https://financedigest.com/stocks-struggle-as-china-rate-cut-sends-oil-tumblinghtml

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By Huw Jones

LONDON (Reuters) – Global shares struggled to advance on Monday while investors digested news of an unexpected cut in Chinese interest rates as data pointed to faltering growth in the world’s second largest economy, sending oil prices nearly 2% lower.

Weaker U.S. stock index futures also weighed on sentiment, while a steadier [dollar knocked gold](https://www.financedigest.com/stocks-and-gold-cheer-u-s-inflation-picture-while-dollar-slides.html "Stocks and gold cheer U.S. inflation picture, while dollar slides").

The MSCI all country index was barely firmer, a month-long advance having whittled [away the benchmark’s decline for the year](https://www.financedigest.com/heathrow-airport-says-return-to-pre-pandemic-demand-years-away.html "Heathrow Airport says return to pre-pandemic demand years away") to about 13%.

China’s central bank cut key lending rates to revive demand as [data showed the economy](https://www.financedigest.com/stocks-yields-fall-data-suggests-u-s-economy-cooling.html "Stocks, yields fall; data suggests U.S. economy cooling") unexpectedly slowing in July, with factory and retail activity squeezed by Beijing’s zero-COVID policy and a property crisis. Until now, investors have been grappling with how much further central banks in the United States and Europe would [hike rates](https://www.financedigest.com/stocks-falter-as-economic-worries-nag-nz-delivers-big-rate-hike.html "Stocks falter as economic worries nag, NZ delivers big rate hike") when they meet next month.

Hopes of smaller [rate hikes](https://www.financedigest.com/sp-warns-of-possible-economic-blow-hit-to-japan-inc-from-boj-rate-hike.html "S&P warns of possible economic blow, hit to Japan Inc from BOJ rate hike") on signs that U.S. [inflation may be peaking helped Wall Street clock up its fourth straight week of gains](https://www.financedigest.com/stocks-mixed-dollar-gains-after-robust-inflation-jobs-data.html "Stocks mixed, dollar gains after robust inflation, jobs data") by Friday.

The [gains on Wall Street and steady growth figures for Japan helped the Nikkei share](https://www.financedigest.com/shares-steady-dollar-gains-ahead-of-u-s-inflation-data.html "Shares steady, dollar gains ahead of U.S. inflation data") average in Tokyo jump to its highest in more than seven months.

“China, I think, is a different situation than the rest of the world. They’ve got a self imposed recession that they’ve created from the zero COVID policy,” said Patrick Armstrong, [chief investment officer at investment house Plurimi Group](https://www.financedigest.com/iris-software-group-names-matt-tuson-as-chief-revenue-officer.html "IRIS Software Group names Matt Tuson as Chief Revenue Officer").

I do think it’s going to be [Fed driven if there is another leg down in markets](https://www.financedigest.com/markets-start-signalling-fed-may-be-going-too-far-amundi.html "Markets start signalling Fed may be going too far – Amundi"). Quantitative tightening, I think, will begin in earnest in September and that’s going to withdraw [liquidity from the market,”](https://www.financedigest.com/zero-liquid-discharge-market-estimates-the-market-to-expand-at-8-to-9-cagr-from-2021-to-2031-2.html "Zero Liquid Discharge Market Estimates The Market To Expand At 8 to 9% CAGR From 2021 to 2031") Armstrong said.

Markets are still implying around a 50% chance the [Fed will hike by 75 basis points in September and that rates](https://www.financedigest.com/oil-up-2-as-dollar-weakens-on-small-us-fed-rate-hike.html "Oil up 2% as dollar weakens on small US Fed rate hike") will rise to around 3.50-3.75% by the end of the year.

The Fed will publish minutes on Wednesday from its last rate-setting meeting, but investor [hopes of them showing the central bank](https://www.financedigest.com/oil-rises-on-demand-hopes-as-banking-crisis-fears-subside.html "Oil rises on demand hopes as banking crisis fears subside") beginning to pivot on rate hikes could be dashed.

“I don’t think (Fed Chair) Powell is going to say that, I don’t think the minutes are going to indicate that,” Armstrong said.

In Europe, the STOXX share index of 600 [leading companies](https://www.financedigest.com/generic-oncology-drugs-market-2021-global-leading-companies-analysis-revenue-trends-and-forecasts-2027.html "Generic Oncology Drugs Market 2021 Global Leading Companies Analysis, Revenue, Trends and Forecasts 2027") was up 0.13% at 441.43 points, still down around 10% for the year.

Graphic: [Fed Rate Futures and Stocks](https://www.financedigest.com/oil-dips-after-fed-comments-us-crude-stock-build.html "Oil dips after Fed comments, US crude stock build") – https://fingfx.thomsonreuters.com/gfx/mkt/mopangymbva/Two.PNG

![](https://www.globalbankingandfinance.com/wp-content/uploads/2022/08/471.jpg)

U.S. [FUTURES EASE](https://www.financedigest.com/heres-how-to-secure-your-financial-future-with-ease.html "Here’s How To Secure Your Financial Future With Ease")

S&P 500 [futures and Nasdaq futures were both down around 0.5% after last week’s gains](https://www.financedigest.com/dollar-gains-as-wall-street-retreats-on-future-fed-hikes.html "Dollar gains as Wall Street retreats on future Fed hikes").

Earnings from major retailers, including Walmart and Target, will be scrutinised for signs of flagging [consumer demand](https://www.financedigest.com/lights-maker-signify-cuts-annual-outlook-on-lower-consumer-demand-china-woes.html "Lights maker Signify cuts annual outlook on lower consumer demand, China woes").

The [cut in Chinese interest rates](https://www.financedigest.com/interest-rates-are-cut-to-an-all-time-low-what-will-this-mean-for-small-businesses.html "Interest rates are cut to an all-time low. What will this mean for small businesses?") failed to stop Chinese blue chips easing 0.13%, while the yuan and bond yields also slipped.

Geopolitical [risks remain](https://www.financedigest.com/with-greater-freedom-comes-heightened-risk-how-to-help-ensure-consumer-data-remains-secure-in-an-open-banking-system.html "With Greater Freedom Comes Heightened Risk: How to Help Ensure Consumer Data Remains Secure in an Open Banking System") high with a delegation of U.S. lawmakers in [Taiwan for a two-day trip](https://www.financedigest.com/pelosi-praises-taiwan-says-asian-trip-wasnt-to-change-status-quo.html "Pelosi praises Taiwan, says Asian trip wasn’t to change status quo").

The bond market still seems to doubt the Fed can manufacture a [soft landing](https://www.financedigest.com/stocks-dollar-gain-on-soft-landing-hopes.html "Stocks, dollar gain on soft landing hopes"), with the yield curve remaining deeply inverted. Two-year [yields at 3.27% are well above those for 10-year notes which were trading](https://www.financedigest.com/stocks-fall-treasury-yields-rise-upon-final-2022-trading-day.html "Stocks fall, Treasury yields rise upon final 2022 trading day") at 2.86%.

Those yields have underpinned the U.S. dollar, though it did slip 0.8% against a basket of currencies last week as risk [sentiment improved](https://www.financedigest.com/european-junk-debt-sales-spring-back-to-life-as-sentiment-improves.html "European junk debt sales spring back to life as sentiment improves").

But on Monday the dollar regained some poise, with the euro down 0.2% against the greenback at $1.02345 after bouncing 0.8% last week. Against the yen, the [dollar steadied](https://www.financedigest.com/shares-steady-dollar-dips-as-us-holiday-lifts-rates-gloom.html "Shares steady, dollar dips as US holiday lifts rates gloom") at 133.51 after losing 1% last week.

Our sense remains that the [dollar rally](https://www.financedigest.com/dollar-jumps-u-s-stocks-buck-global-rally.html "Dollar jumps, U.S. stocks buck global rally") will resume before too long,” argued Jonas Goltermann, a senior economist at Capital Economics.

Gold was down 0.8% at $1,786, [losing nearly all of its 1% gains last week](https://www.financedigest.com/european-shares-end-five-day-losing-streak-still-down-for-the-week.html "European shares end five-day losing streak, still down for the week").

[Oil prices eased as China’s disappointing data](https://www.financedigest.com/oil-jumps-on-lower-than-expected-us-inflation-data.html "Oil jumps on lower-than-expected US inflation data") added to worries about global demand for fuel.

The head of the [world’s top](https://www.financedigest.com/top-10-fastest-bikes-in-the-world.html "Top 10 fastest bikes in the world") exporter, Saudi Aramco, said it was ready to ramp up output while production at several offshore U.S. [Gulf of Mexico platforms](https://www.financedigest.com/vat-in-the-gulf-corporation-council-accelerating-compliance-with-the-right-erp-platform.html "VAT in the Gulf Corporation Council—Accelerating Compliance with the Right ERP Platform") is resuming after a brief outage last week.

Brent slipped 1.8% to $96.35, while U.S. crude fell 1.9% to $90.34 per barrel.

(Reporting by Wayne Cole; Editing by Sam Holmes, Raju Gopalakrishnan and Ed Osmond)


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