Global Stocks End Mixed After China Cuts Interest Rates

Stocks around the world were mixed after China cut interest rates in a bid to support its slowing economy.

U.S. markets were closed for a public holiday Monday and trading activity globally was light. The pan-continental Stoxx Europe 600 closed 0.7% higher. The Shanghai Composite Index climbed 0.6% and Japan’s Nikkei 225 advanced 0.7%. Hong Kong’s Hang Seng Index fell 0.7% and Korea’s Kospi Index slid 1.1%.

Stocks globally have been buffeted in the first few weeks of the year by expectations about global central bank policy and the rapid spread of the Omicron variant. Data out Monday showed Chinese growth decelerated in the fourth quarter, although it still came in above economists’ forecasts. Underscoring concerns, the People’s Bank of China cut two key interest rates, a move that will likely translate into lower benchmark lending rates.

China’s economy and central-bank policy and what this means for global growth is a key driver of market sentiment, said Florian Ielpo, head of macro at Lombard Odier Investment Managers.

“China is on a very different path than the rest of the world, it is a striking difference,” Mr. Ielpo said. “We are nervous about what’s happening in China right now.”

Other analysts saw the rate cuts in a more positive light. Chinese authorities are likely to step up policy support, both monetary and fiscal, said Dong Chen, head of Asia macroeconomic research at Pictet Wealth Management.

The Tokyo Stock Exchange. Japan’s Nikkei 225 advanced 0.7% Monday.

Photo: Toru Hanai/Bloomberg News

Investors are gearing up for another big week of U.S. earnings, with Goldman Sachs set to report Tuesday and Bank of America and Morgan Stanley scheduled for Wednesday. Household names such as Procter & Gamble and UnitedHealth are slated to post results Wednesday, followed by American Airlines and Netflix on Thursday.

“One of our major calls for 2022 is that banks will surprise to the upside,” said Lale Akoner, a market strategist at BNY Mellon Investment Management.

More broadly, “wages are going higher, energy costs are still very elevated so inflation overall is going to pressure margins. This will definitely show in earnings in 2022,” Ms. Akoner said. “Large-caps usually weather this better than small-caps.”

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Bitcoin fell 2.5% from its level at 5 p.m. Friday and traded at around $42,250. It has declined around 38% from the all-time high it notched in November.

Unilever shares tumbled over 7% after the consumer-goods giant said over the weekend that it had approached GlaxoSmithKline and Pfizer about buying their consumer-health joint venture. Its latest proposal valued the unit at $68.4 billion. U.K.-listed GlaxoSmithKline shares rose nearly 4%.

Credit Suisse shares declined 2.2% after the bank’s chairman resigned following an investigation into his personal use of a corporate jet and breaching of Covid-19 quarantine rules.

Chinese casino stocks jumped after Macau’s cabinet drafted a new law on licensing that was milder than investors had feared. Sands China rose 15%, Wynn Macau added 12% and Galaxy Entertainment Group gained 7%. Major Chinese developer Country Garden dropped 8%, declining for a fourth day as the turmoil in the country’s real-estate market continued.

Write to Anna Hirtenstein at [email protected] and Dave Sebastian at [email protected]