Asian stock market- Worldwide shares diverge post-Biden’s 2024 election withdrawal

Asian stock market- European stock markets kicked off the week with positive gains, buoyed by the news of President Joe Biden’s withdrawal from the 2024 presidential race. This political shift has sparked optimism in European financial circles, with major indices showing significant upward movement.

• Germany’s DAX rose by 0.8% to 18,311.32 points in early trading.
• France’s CAC 40 also gained 0.8%, reaching 7,596.64 points.
• The FTSE 100 in London climbed 0.5% to 8,194.82 points.

The futures for major U.S. indices also showed modest gains:

• S&P 500 futures increased by 0.3%.
• Dow Jones Industrial Average futures edged up by 0.1%.

These gains in European and U.S. futures markets reflect a generally positive sentiment despite the political uncertainty introduced by Biden’s departure from the presidential race.

Asian Markets Display Mixed Responses

In Asia, the reaction to Biden’s announcement was more nuanced, with significant variations across different markets:

• Japan’s Nikkei 225 fell by 1.2%, settling at 39,599.00 points. This decline highlights ongoing economic concerns in Japan amidst global uncertainties.
• Hong Kong’s Hang Seng Index saw an increase of 1.3%, reaching 17,635.88 points. This rise indicates a positive response in the Hong Kong market.
• Shanghai Composite Index decreased by 0.6%, falling to 2,964.22 points. This decline came after China’s central bank implemented unexpected rate cuts.

China’s Central Bank Cuts Rates to Stimulate Growth

The People’s Bank of China (PBOC) has made notable changes to its monetary policy, responding to ongoing economic challenges and a persistent downturn in the property sector. In a recent decision, the PBOC lowered its one-year benchmark loan prime rate (LPR) from 3.45% to 3.35% and reduced the five-year LPR from 3.95% to 3.85%. These adjustments are part of a broader strategy to invigorate economic activity and stimulate growth in various sectors.

Reasons Behind the Rate Cuts

The rate cuts come against the backdrop of a slower-than-expected economic performance. Data released for the second quarter revealed that China’s economy expanded at an annual rate of just 4.7%, falling short of prior expectations. This slower growth has raised concerns about the effectiveness of existing economic policies and highlighted the need for further intervention.

The reduction in the one-year LPR, which is a key benchmark for short-term business loans, aims to make borrowing cheaper for companies and encourage investment and spending. Meanwhile, the cut in the five-year LPR, which influences mortgage rates and longer-term borrowing, is intended to support the property market and alleviate some of the pressures faced by the sector.

Technology Outage Impact and Market Reactions

The previous week was marked by a massive technology outage that disrupted various sectors, including transportation, banking, and healthcare. The outage was traced to a faulty update issued to computers running Microsoft Windows, according to cybersecurity firm CrowdStrike. This incident had significant repercussions:

• CrowdStrike’s stock plummeted by 11.1%.
• Microsoft’s stock decreased by 0.8%.

This technology issue contributed to market declines in the previous week:

• S&P 500 Index fell by 0.7%, marking its first losing week in three and the worst performance since April.
• Dow Jones Industrial Average dropped by 0.9%.
• Nasdaq Composite Index sank by 0.8%.

Commodity and Currency Market Movements

Commodity markets showed some stability amidst the global financial fluctuations:

• U.S. benchmark crude oil prices held steady at $78.64 per barrel in electronic trading on the New York Mercantile Exchange.
• Brent crude, the international standard, increased by 7 cents to $82.70 per barrel.

Currency markets also experienced fluctuations:

• The U.S. dollar fell to 156.64 Japanese yen from 157.49 yen.
• The euro rose slightly to $1.0892 from $1.0877.

These movements in the commodity and currency markets reflect ongoing adjustments to the evolving economic and political landscape.

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