Given the economic and fundamental backdrop, yesterday’s sharp sell-off was somewhat perplexing. Central banks started to lower interest rates, which was a confident sign that recession had been avoided. China’s tacit admission of failing to revive its economy and the resultant introduction of monetary stimulus was greeted with an audible sigh of relief.
Following last week’s rate cut by the Federal Reserve yesterday was the turn of the Chinese central bank to reassure markets that it is doing whatever it takes to revive its economy. In the broadest stimulus measure since the pandemic, it announced a reduction in borrowing costs on mortgages of up to $5.3 trillion, together with alleviating restrictions on second home purchases, lowering repurchase rates and banks’ reserve ratio requirements.
Our fears of Iran being drawn into the escalating conflict between Israel and Hezbollah was met with a reprimand from the president of the Persian Gulf OPEC producer who said on his visit to New York for the UN General Assembly gathering that Iran does not want a wider war in the region and called for dialogue to resolve the conflict.
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