World shares saw a positive uptick on Wednesday following the announcement from China's central bank regarding fresh measures to boost the country's slowing economy and stabilize financial markets. This move by the People's Bank of China triggered a surge in Hong Kong's benchmark by 3.6%, while shares in Tokyo experienced a slight dip. However, most other major markets saw an increase, and oil prices also advanced.
In early European trading, Germany's DAX gained 1.1%, reaching 16,803.96, and the CAC 40 in Paris rose by 0.6% to 7,429.36. Britain's FTSE 100 also saw a modest increase of 0.3% to 7,505.18. Additionally, the future for the S&P 500 gained 0.4%, while the Dow Jones Industrial Average was up 0.2%.
China's decision to cut its reserve ratio requirement by 0.5 percentage points, injecting an additional 1 trillion yuan ($141 billion) into the economy starting from February 5, aimed to address the recent sluggishness in Chinese markets. The move comes amidst concerns that investors had become too pessimistic about the country's recovery from pandemic-related shocks.
Wang Jiangjun, the vice chairman of the China Securities Regulatory Commission, also emphasized the need for better protections for investors and for instilling confidence in the markets, which have experienced a downturn in recent months. These efforts were supported by gains in technology companies such as e-commerce giant Alibaba, which saw a surge of 5.5% in Hong Kong's Hang Seng, resulting in a 3.6% overall increase to 15,899.87. Meanwhile, the Shanghai Composite index recovered from early losses and rose by 1.8% to 2,820.77.
Japan reported a rise in exports of almost 10%, attributed to strong demand for machinery, vehicles, and semiconductors, while imports fell by 7% for the full year. As a result, Japan ended with a trade deficit of 9.2 trillion yen, a significant decrease from the 20.3 trillion yen deficit reported the previous year. However, economists caution that the growth in export could be short-lived, projecting a slowdown as foreign demand for Japanese goods eases.
Tokyo's Nikkei 225 index experienced a decline of 0.8% to 36,226.48 as investors speculated about a potential shift in the Bank of Japan's lax monetary policies. South Korea's Kospi also fell by 0.4% to 2,469.69, while Australia's S&P/ASX 200 edged 0.1% higher to 7,519.20. India's Sensex experienced a minor loss of 0.1%, while the SET in Bangkok saw a modest 0.2% increase.
On Tuesday, the S&P 500 achieved another record high, rising by 0.3% to 4,864.60, as the earnings reporting season for major U.S. companies gained momentum. The Nasdaq composite also experienced a 0.4% increase. However, the Dow Jones Industrial Average slipped by 0.3% after surpassing 38,000 points for the first time a day earlier. This week, more than 50 companies, including Tesla and Intel, are scheduled to release their quarterly results. Analysts predict weaker overall earnings per share for S&P 500 companies compared to the previous year, marking the fourth decline in the last five quarters. Despite this, stocks have continued to rally to record highs based on the anticipation of multiple interest rate cuts by the Federal Reserve in the coming year.
The prospect of rate cuts could potentially boost prices for investments while alleviating pressure on the economy and the financial system. Although Treasury yields have already eased considerably since the autumn due to expectations of future rate cuts, there are concerns that traders may have overestimated the number and timing of these cuts.
In other trading on Wednesday, U.S. benchmark crude oil rose by 48 cents to $74.85 per barrel on the New York Mercantile Exchange. Conversely, it had relinquished 39 cents on Tuesday. Brent crude, the international standard, gained 38 cents, reaching $79.93 per barrel.
The U.S. dollar experienced a slight decline, slipping to 147.54 Japanese yen from 148.38 yen. Meanwhile, the euro strengthened to $1.0901 from $1.0855.
