U.S. and Europe Markets Advance on China Rate Cut and ECB Inflation Stance

Nichole Harper
21 Nov, 2014
New York City

Markets in Europe and New York advanced after China unexpectedly cut interest rates and the European Central Bank President Mario Draghi hinted of new measures to accelerate inflation at a faster pace.

[R]4:20 PM New York – Markets in Europe and New York advanced after China unexpectedly cut interest rates and the European Central Bank President Mario Draghi hinted of new measures to accelerate inflation at a faster pace.[/R]

Market indexes in New York and in Europe advanced after China unexpectedly lower interest rates and the central bank in the euro zone reiterated its commitment to lift inflation as early as possible.

Market indexes in Europe surged between 1% and 2% after European Central Bank President Mario Draghi speaking at the European Banking Congress in Frankfurt said that the bank will widen its asset-purchase program if necessary.

Draghi also said that the central bank must drive inflation higher as soon as possible and said that any new action may include one or all of measures including cuts in interest rates, asset-backed securities and covered-bonds as well.

Unexpected Rate Cut in China

China unexpectedly cut interest rates and also allowed banks to pay more rates on deposits. The changes are scheduled to take effect on Saturday.

The People’s Bank of China lowered one-year benchmark rate by 0.25 percentage point to 2.75% and reduce the one-year lending rate by 0.4 percentage point to 5.6%.

The central bank also allowed banks to pay as much as 120% of the benchmark rate, up from 110%.

The move is not likely to have a large impact on the slowing economic growth but will impact the large state controlled to borrow and refinance at a cheaper rate.

However, much of the small scale manufacturing sector is outside the banking system and relies on expensive loans from non-banking institutions.

In stock market trading, Tollbooth Index gained 0.7% or 66.13 to 9,958.52.

S&P 500 index increased 11.73 or 0.6% to 2,064.40 and the Nasdaq Composite Index gained 20.82 or 0.4% to 4,722.53.

U.S. Movers

The Blackstone Group L.P ((BX)), the investment company agreed to acquire Japan-based residential assets from General Electric Co in a deal worth more than $1.6 billion or 190 billion yen.

The Gap Inc ((GPS)), the specialty retailer reported net sales in the third-quarter ending on November 1 nearly flat at $3.97 billion from a year ago period. Comparable store sales in the quarter slipped 2%.

Net income in the quarter jumped 4.1% to $351 million or 80 cents a diluted share compared to $337 million or 72 cents from a same quarter last year.

Ross Stores, Inc ((ROST)), the off-price retailer net sales in the third-quarter ending on November 1 climbed 8% to $2.60 billion from a year ago period. Comparable store sales in the quarter jumped 4%.

Net income in the quarter soared 12.2% to $192.7 million or 93 cents a diluted share compared to $171.6 million or 80 cents from a same quarter last year.

European Markets

In London trading, FTSE 100 index jumped 1.4% or 90.93 to 6,769.83 and in Frankfurt the DAX index climbed 2.5% or 238.38 to 9,722.35.

In Paris, CAC 40 index advanced 2.7% or 114.28 to 4,348.49.

Carrefour SA, the France-based hypermarket operator received the approval from the Competition Authority of France to acquire more than 800 Dia France stores.

The transaction is expected to close in the next month.

Rolls-Royce Holding Plc, after the U.K.-based aircraft engine maker won an order worth £3.2 billion or $5 billion to power 50 new Delta Air Lines aircrafts.

Asian Markets

Stocks in Tokyo trading reversed decline in the final hour of the session as Japan heads for a snap election.

Prime Minister Shinzo Abe dissolved parliament and scheduled early election with the hope that a larger majority will help the new government to pass the delayed increase in sales tax.

Japan is in the grip of two-decade long economic stagnation as the export led economy struggles to revive domestic aggregate demand and industrial overcapacity.

The Nikkei 225 Stock Average increased 56.65 or 0.3% to 17,357.51 and the broader Topix index rose 2.54 to 1,400.18. For the week, Nikkei 225 slipped 0.8%.

The yen closed rose 0.4% to close at 117.80 against one dollar.

In Mumbai trading, the Sensex Index climbed 267.07 or 1% to close at 28,334.63. The CNX Nifty gained 75.45 or 0.9% to 8,477.35.

For the week, Sensex and CNX Nifty climbed 1%.

Kotak Mahindra Bank Limited, the largest private bank agreed to acquire ING Vysya Bank for $2.5 billion.

The deal will put Kotak Mahindra as the four-largest bank in India with strong presence in the Western and Southern states in India.

Larsen & Toubro Limited, the company and Japan-based Sojitz Corporation won railway electrification contract in India worth 50 billion yen or Rs 2,633 crore.

The contract is electrify more than 900 kilometers of railroad tracks connecting Vadodara and Rewari in Gujarat State.