Stimulus indications from China and Europe boosted markets worldwide, MarketWatch reported. The Chinese and eurozone economies have seen recent stagnancy, prompting investors and economists to call for action from the two central banks.
Friday, November 21, 2014
The Stoxx Europe 600 advanced 1.4% on Friday. Germany’s DAX 30 gained 1.9%, France’s CAC 40 rose 1.6% and the UK’s FTSE 100 advanced 0.9%. In China, the Nikkei Average and Hang Seng Index increased 0.3%.
Eurozone prepared to increase stimulus
European Central Bank President Mario Draghi indicated on Friday that the bank is prepared to augment its stimulus program if inflation remains below the target, according to MarketWatch. Draghi said in a banking conference that sovereign asset purchasing – known as quantitative easing – is a possibility.
“ … [W]e will do what we must to raise inflation and inflation expectations as fast as possible, as our price stability mandate requires of us,” Draghi said in an address. “If on its current trajectory our policy is not effective enough to achieve this, or further risks to the inflation outlook materialize, we would step up the pressure and broaden even more the channels through which we intervene, by altering accordingly the size, pace and composition of our purchases.
The eurozone has a goal of just under 2% annual inflation, but October’s rate came in at 0.4%. Thus far, the ECB tried to cut interest rates and bank loans, but those measures have not been effective as of yet. With the promise of renewed stimulus, analysts are optimistic the region’s economy will recover over the next year.
China central bank cuts interest rates
For the first time in over two years, the People’s Bank of China reduced interest rates as a means of boosting economic growth, reported The Wall Street Journal. The move took investors by surprise because the bank had not yet made a significant effort to address its faltering growth.
Many analysts expected China to fall short of its annual growth target for the first time since the late 1990s.
The bank reduced its one-year loan rate from 6.0% to 5.4%. The signal indicates to investors and the population in general that the Chinese government is taking steps to bring its economy out of the doldrums.
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