China’s rate cut bolsters global stocks

Julian Harris
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Shares throughout the world were given a lift yesterday after an unexpected dose of monetary loosening from China boosted hopes that it could stimulate global demand.

The MSCI world equity index rose 0.9 per cent to 301.94 points. A global rally saw shares hit their highest level in more than a week, although gains were pared by a less dovish statement from Federal Reserve chief Ben Bernanke.

Nonetheless, news from China helped to prop up equities. The People’s Bank of China announced that the benchmark interest rate would be slashed by 25 basis points, brushing off fears over inflation and delivering China’s first rate cut since the global financial crisis.

An in a further step towards liberalisation, authorities in the fast-growing economy announced that banks would be allowed additional flexibility to set competitive lending and deposit rates.