China announced reductions in its benchmark lending rates, aiming to bolster its struggling economy amid ongoing trade tensions. State banks have lowered deposit rates by 5-25 basis points in a bid to support growth, although economists remain skeptical about Beijing’s ability to achieve its 5% growth target without further stimulus measures. Economic recovery in China remains fragile, with some analysts suggesting that current efforts may not suffice to counteract the pressures from the trade war and other global economic challenges.
Additionally, banks are experiencing profit pressure, complicating the broader financial landscape. This move follows recent adjustments in China’s key financial metrics, including the 1-year loan prime rate, 5-year loan prime rate, and 7-day reverse repo rate. These changes reflect the government’s ongoing efforts to stimulate economic activity and maintain financial stability.
Despite these measures, China’s growth outlook remains uncertain, with many calling for more aggressive policies to ensure sustained recovery. Asia-Pacific markets climbed Tuesday as China cut its key lending rates by 10 basis points to boost its economy amidst ongoing trade tensions. The People’s Bank of China trimmed the 1-year loan prime rate to 3.0% from 3.1%, and the 5-year LPR to 3.5% from 3.6%.
In market performance, Hong Kong’s index rose 1.49% to close at 23,681.48, while mainland China’s CSI 300 added 0.57% to close at 3,899.37. Japan’s benchmark rose 0.08% to close at 37,529.49, and the Topix added 0.02% to close at 2,738.83.
China cuts key lending rates
South Korea’s index closed the day flat at 2,601.8, while the small-cap Kosdaq jumped 0.25% to close at 715.55. Similarly, Australia’s benchmark S&P/ASX 200 rose 0.58% to close at 8,343.3.
Australia’s central bank cut its policy rate to 3.85%, its lowest level since May 2023, as inflation concerns in the country continue to recede. The Reserve Bank of Australia emphasized that bringing inflation down sustainably remains its highest priority.
Investors are also focusing on the world’s largest battery manufacturer, Contemporary Amperex Technology, which saw its shares rise over 11% in its Hong Kong trading debut on Tuesday. In the U.S., stock futures were little changed. The Dow Jones Industrial Average futures rose less than 0.1%, S&P 500 futures were down 0.1%, while Nasdaq 100 futures added 0.14%.
Overnight, the three major averages posted slim gains as Treasury yields came off their highs. In other developments, Japan’s 40-year government bond yield rose over 10 basis points to a record high of 3.56%, following Moody’s downgrade of the U.S. credit rating. There’s ongoing discussion about the potential for retaliatory trade policies to disrupt the global semiconductor supply chain.
Ajit Manocha, president and CEO of SEMI, highlighted the importance of international cooperation to avoid another chip shortage crisis. Additionally, Nippon Steel is planning to invest $14 billion into U.S. Steel’s operations, contingent on approval from the U.S. government. This investment underscores the continuing integration and collaboration in the global steel industry.
