STOCKS
Due to an economic slowdown, China is increasing their
monetary-easing measures in order to improve heavy debt burdens on the
government as well as companies. On Sunday, the People's Bank of China (PBOC)
said that effective from Monday, they would reduce the benchmark lending and
deposit rates by a percentage point. This marks the bank’s 3rd rate cut in the
last 6 months. As a result of this recent move, there is a clear indication
that Chinese officials are concerned regarding the severe debt in the country
as a result of credit expansion over the last few years which has happened too
rapidly. It is evident that China has been struggling to improve the economy in
the world’s 2nd largest economy. Added to this, The Wall Street Journal had
also reported that the PBOC is considering introducing a credit-easing tool
which will enable local governments to restructure the hefty debts. Meanwhile,
it has been noticed that from 1:20 p.m. to 2:20 p.m., Chinese stocks decline
and this decline is clearly evident if we review the movement of the Shanghai
Composite Index over the past 30 days. On Friday, the index declined 359 points
during that hour which marked the 19th decline in 30 sessions. According to Hao
Hong, a strategist at Bocom International Holdings Co. in Hong Kong, the time
is significant since most large Chinese companies and institutions usually
place sell orders at that time in order to accommodate for the 109% increase in
Shanghai shares over the past year. In this way, portfolios are gradually being
re-balanced.
INDICES
As a result of positive nonfarm payroll data on Friday, U.S.
stocks rallied. On the day, the Dow industrials posted its largest 1-day point
gain in more than three months. With the positive NFP data which showed that
the country added 223,000 jobs in April, investors have a positive sentiment
that growth in employment in the country is healthy which points to a solid
economy. Added to this, the unemployment rate declined to 5.4 percent in April.
At the close of trading, the Dow Jones Industrial Average (DJIA) advanced 1.5%,
or 267.05 points, to 18,191.11. For the week, the blue chip index finished 0.9%
higher. Meanwhile, the S&P 500 index (SPX) was also on the upside rising
1.4%, or 28.09 points, to 2,116.09. The index gained 0.4 percent over the week
with all 10 sectors higher on Friday. Also on the upside was the Nasdaq
Composite index (COMP) which rose 1.2%, or 58 points, to 5,003.55. The tech
heavy index closed the week roughly where it started.
CURRENCIES
On Friday, in currency trading, the U.S. dollar (USD) traded
higher. This came after closely watched data showed that slightly fewer jobs
were created in the U.S. last month while the unemployment rate declined.
According to the report by the Department of Labor, 223,000 jobs were added in
April. This missed expectations for an increase of 224,000. Meanwhile, the
unemployment rate in the U.S. declined from 5.5% in March to 5.4% in April. The
GBP/USD traded higher at 1.5394, up 0.97% while the EUR/USD traded at 1.1207,
down 0.52 percent. Also, the USD/CHF traded at 0.9269, up 0.55% while the yen
traded steady with the USD/JPY at 119.81. Also, the U.S. dollar index was at
94.92, up 0.20 percent.
COMMODITIES
On Monday, in early morning Asian trading, crude oil prices
declined. This came in response to the recent move by the People’s Bank of
China to cut rates by a quarter percentage point from 5.35% to 5.10% in order
to spur growth. WTI crude oil for June delivery traded at $59.27 a barrel, down
0.20%, on the NYMEX. On Friday last week, WTI oil futures gained in response to
data which showed that the number of oil rigs in the U.S. declined by 11 to
668. This marks the 22nd straight week of declines. Meanwhile, also on Friday,
Brent crude oil for delivery in June traded at $65.39 a barrel, down 0.23%, or
15 cents, on the ICE Futures Exchange in London.
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