World shares advanced Tuesday, with Chinese markets logging the biggest gains after Beijing announced a slew of measures to support the faltering economy.
Shares in Hong Kong and Shanghai jumped more than 4% and the optimism spilled into other markets. Oil prices surged nearly $2 and U.S. futures also were higher.
In early European trading, Germany’s DAX picked up 0.7% to 18,985.15 and the CAC 40 in Paris climbed 1.6% to 8,291.90. Britain’s FTSE 100 was up 0.4% at 8,292.07.
In the broadest and most coordinated effort so far, People’s Bank of China Gov. Pan Gongsheng said the reserve requirement for banks would be cut by 0.5 percentage points and that the central bank would follow up with further cuts. That would free up more money for lending.
The central bank also will reduce interest rates on its loans to commercial banks, cut the down payment requirement on purchases of second homes to 15% from 25% and pursue other policies to help boost markets and revive slowing growth, Pan and other officials told a news conference in Beijing.
For once, investors who showed little enthusiasm for earlier, more cautious moves, appeared impressed. Major developer Shimao Group Holdings’ Hong Kong-traded shares jumped 15.1% and Longfor Group Holdings’ rose 5.6%.
The coordinated measures, instead of “drip-feeding piecemeal support,” are “a step in the right direction,” Julian Evans-Pritchard of Capital Economics said in a commentary.
“But it will probably be insufficient to drive a turnaround in growth unless followed up with greater fiscal support,” he said.
The Hang Seng in Hong Kong surged 4.1% to 18,985.15, while the Shanghai Composite index picked up 4.2% to 2,863.13.
Tokyo’s Nikkei 225 index climbed 0.6% to 37,940.59, while the Kospi in Seoul jumped 1.1% to 2,631.68.
Australia’s S&P/ASX 200 fell 0.1% to 8,142.00 after the central bank kept its benchmark rate unchanged and suggested it won’t cut rates until next year.
On Monday, the S&P 500 rose 0.3% to 5,718.57, edging past its record set on Thursday. The Dow Jones Industrial Average added 0.1% to its own all-time high set on Friday and closed at 42,124.65. The Nasdaq composite gained 0.1% to 17,974.27.
A report suggested U.S. business activity is not growing as quickly as economists expected, mostly because of a continued downturn in manufacturing.
Several economic reports coming later in the week could offer more context about where the U.S. economy stands. One on Thursday will offer the final revision for the U.S. economy’s growth in the spring, and another on Friday will give a look at how much U.S. consumers are spending.
Such reports, particularly on employment, are taking top priority on Wall Street because the main fear is now a slowdown in the job market. It’s a notable shift from prior years, when Wall Street’s attention was fixed on anything related to inflation.
But now that inflation has come down substantially from its peak two summers ago, the Fed has shifted gears.
It feels less need to keep rates high in order to slow the economy enough to stifle inflation, hence last week’s cut of half a percentage point to its main interest rate. And it feels more pressure to prop up the job market and overall economy, hence its plans to keep cutting interest rates this year and next.
In the bond market, the yield on the 10-year Treasury held steady at 3.74%, where it was late Friday. The yield on the two-year Treasury, which moves more with expectations for Fed action, edged down to 3.58% from 3.60% late Friday.
In other dealings early Tuesday, U.S. benchmark crude oil added $1.95 to $72.32 per barrel. Brent crude, the international standard, was up $1.88 at $75.09 per barrel.
The U.S. dollar rose to 144.08 Japanese yen from 143.61 yen. The euro was trading at $1.1136, up from $1.1113.
