Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Stimulus swells as China eases, India spends

Published 03/02/2015, 12:18 AM
Updated 03/02/2015, 12:18 AM
© Reuters. Chinese national flag flutters at the headquarters of a commercial bank on a financial street near the headquarters of the People's Bank of China, China's central bank, in central Beijing

© Reuters. Chinese national flag flutters at the headquarters of a commercial bank on a financial street near the headquarters of the People's Bank of China, China's central bank, in central Beijing

By Wayne Cole

SYDNEY (Reuters) - The tide of global stimulus is swelling as China cut interest rates and India launched an expansionary budget over the weekend, even as a mixed bag of manufacturing surveys underlined the challenges facing the region.

The Reserve Bank of Australia (RBA) holds its March policy meeting on Tuesday and there is a real chance it will cut rates for a second time in as many months. [TOP/CEN]

Investors seemed encouraged enough by all this policy action to nudge most share markets higher while giving a fillip to commodities such as copper.

Cuts to benchmark lending and deposit rates announced by the People's Bank of China (PBOC) on Saturday evening pre-empted official data showing a second consecutive month of shrinking manufacturing activity (PMI).

There was better news from the private HSBC/Markit version of the PMI on Monday, which climbed to a seven-month top of 50.7 in February, from 49.7 in January, as new orders picked up.

But it also showed China's manufacturers were struggling to cope with erratic export demand and deflationary pressures.

Thus, analysts suspect the PBOC's easing, its third major policy move since late November, will not be the last.

"The priority has been shifted to safeguard growth," wrote analysts at OCBC Bank. "We still expect one more interest rate cut in the second quarter and the next possible move is likely to be a reserve requirement ratio cut."

They also saw scope for fiscal policy to play a part with government spending likely to pick up after the National People's Congress meeting this week.

Over the weekend, India's reform-minded prime minister, Narendra Modi, released a budget that pleased economists and investors with pledges to spend more on modernizing aging roads and railways while keeping borrowing in check.

Ratings agency Moody's judged that the budget prioritized growth over deficit reduction.

"Recent policy announcements, including the budget, support Moody's expectation that India's growth will remain stronger than the global average, and more robust than the median for similarly rated sovereigns," the agency concluded.

The February HSBC PMI for India dipped to a five-month low in but at 52.9 still pointed to solid growth in the sector.

Japan's Markit/JMMA PMI faded a little to a final 51.6 in February, from January's 52.2 in January, but new export orders rose for the eighth straight month in a promising sign.

South Korea's PMI held at a 20-month peak of 51.1 in February with output and new export orders expanding, data from Markit Economics showed.

The survey helped offset news that industrial output suffered to worst monthly drop in six years n January, a downturn officials blamed on one-off factors and holidays.

There were fewer excuses for Indonesia as its PMI fell to 47.5 in February, the lowest reading since the survey began in April 2011. The result added to speculation of another rate cut there after a surprise move last month.

Final PMIs will be released for other global economies later in the day, with marginal growth in activity expected in the euro zone but continued strong growth in the United States.

© Reuters. Chinese national flag flutters at the headquarters of a commercial bank on a financial street near the headquarters of the People's Bank of China, China's central bank, in central Beijing

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.