World shares advance after China cuts interest rates to boost economy

World shares rallied on Tuesday after China cut key interest rates to help counter an economic slowdown exacerbated by trade friction with Washington.

Shares in China’s CATL, the world’s largest manufacturer of electric batteries, jumped 16.4% in its Hong Kong trading debut after it raised about $4.6 billion in the world’s largest IPO this year. Its shares traded in Shenzhen, mainland China’s second-largest stock market after Shanghai, gained 1.2% after dipping earlier in the day.

The Reserve Bank of Australia reduced its benchmark interest rate by a quarter percentage point for the second time this year, to 3.85%, judging inflation to be within its target range. The earlier reduction, in February, was Australia’s first rate cut since October 2020.

The future for the S&P 500 lost 0.3%, while that for the Dow Jones Industrial Average was 0.1% lower.

In European trading, Germany’s DAX edged 0.2% higher to 23,988.93, while the CAC 40 in Paris climbed 0.1% to 7,892.94. Britain’s FTSE 100 rose 0.5% to 8,745.62.

China’s central bank made its first cut to its loan prime rates in seven months, a move welcomed by investors eager for more stimulus as the world’s second-largest economy feels the effects of Trump’s higher tariffs.

The People’s Bank of China cut the one-year loan prime rate, the reference rate for pricing all new loans and outstanding floating-rate loans, to 3.00% from 3.1%. It reduced the five-year loan prime rate to 3.5% from 3.6%.

With China’s chief concern being deflation due to weak demand rather than inflation, economists had been expecting such a move. Data reported on Monday showed the economy under pressure from Trump’s trade war, with retail sales and factory output slowing and property investment continuing to decline.

Tuesday’s cuts are unlikely to be the last this year, Zichun Huang of Capital Economics said in a report.

“But modest rate cuts alone are unlikely to meaningfully boost loan demand or wider economic activity,” Huang said.

Hong Kong’s Hang Seng gained 1.5% to 23,681.48, while the Shanghai Composite Index advanced 0.4% to 3,380.48.

In Tokyo, the Nikkei 225 inched up 0.1% to 37,529.49, while Australia’s S&P/ASX 200 rose 0.6% to 8,343.30.

South Korea’s Kospi lost 0.1% to 2,601.80, while the Taiex in Taiwan was nearly unchanged.

India’s Sensex lost 0.8%.

On Monday, US stocks, bonds and the value of the US dollar drifted through a quiet day after Moody’s Ratings became the last of the three major credit-rating agencies to declare that the US federal government no longer deserves a top-tier "Aaa" rating.

The S&P 500 picked up 0.1%, and the Dow industrials added 0.3%. The Nasdaq Composite was nearly unchanged.

The downgrade by Moody’s coincided with a debate in Washington over potential tax cuts that could reduce revenue.

If the government has to pay more in interest to borrow money, that could cause interest rates to rise for US households and businesses, in turn slowing the economy.

The downgrade adds to a long list of concerns for investors, chief among them Trump’s trade war. It has forced investors worldwide to question whether the US bond market and the US dollar still merit their reputations as among the safest places to park cash during a crisis.

The US economy has held up so far, and hopes are high that Trump will eventually ease tariffs after striking trade deals with other countries.

But major companies have been warning about uncertainty over the future. Walmart, for example, said recently that it will likely have to raise prices due to tariffs. That prompted Trump over the weekend to criticise Walmart and demand it and China "absorb the tariffs."  

Walmart’s stock slipped 0.1% on Monday.

In other trading early Tuesday, US benchmark crude oil lost 4 cents to $62.10 per barrel. Brent crude, the international standard, shed 11 cents to $65.43 per barrel.

The US dollar fell to 144.44 Japanese yen from 144.86 yen. The euro climbed to $1.1261 from $1.1244.

By RSS/AP