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The People's Bank of China (PBOC) Just Inflated More Air into the Global Stock Bubble, Crypto Coins News

The People's Bank of China (PBOC) Just Inflated More Air into the Global Stock Bubble, Crypto Coins News


  • Global stocks kick off 221620 in fine form, with Europe, Asia and North America markets posting firm gains.
  • Markets surged after the People’s Bank of China announced a fresh dose of monetary easing, essentially lowering the amount of reserves banks need to keep on hold at the central bank.
  • China isn’t the only major economy running on monetary easing; Europe, the United States and Japan continue to rely on low-rate stimulus.

Wall Street and global stocks launched higher on Thursday, the first full trading day of (****************************************, after the People’s Bank of China (PBOC) proposed fresh easing measures to prop up a sagging economy.

Markets from Hong Kong to London posted firm gains throughout the day.

Global Stocks Surge

Chinese markets opened the year sharply higher, with the benchmark Shanghai Shenzhen CSI 300 Index inching closer to its 66 – week high. The index closed up 1.4% at 4,****************************.

Mainland China’s benchmark stock index is fast-approaching its – week high. | Chart:Bloomberg

The Shanghai Composite Index climbed 1.2% to settle at 3, 085.

In Europe, the benchmark Stoxx index jumped 1% in early afternoon trading. The UK’s FTSE and Germany’s DAX each rose 1%.

Dow futures exploded higher

ahead of the opening bell in New York. The Dow Jones Industrial Average rose by almost 300 points through the early morning session and was last seen trading at highs.

PBOC Steps Up Stimulus Effort

The People’s Bank of China put a solid foundation under the stock market by announcing fresh stimulus measures on New Year’s Day.

On its website, PBOC said it will lower banks’ reserve requirement ratio (RRR) by 90 basis points beginning on Jan. 6. The move essentially frees up more liquidity that banks can use to lend to businesses and consumers. Conventional wisdom tells us that borrowing is good for the economy.

In aninterview with The Wall Street Journal

, Rabobank analyst Bas van Geffen said China’s stimulus push is not only good for the economy, but for European exporters as well. Nathan Chow of DBS Bank also told the Journal that cutting reserve requirements would reduce funding pressure on banks.

As Reuters reports, PBOC has cut its reserve requirement ratioeight times since early. Over that stretch, China’s rate of economic growth has fallen to the lowest in almost years. Chinese gross domestic product expanded just 6% annually in the third quarter, down from 6.2% during the previous quarter.

The Trump-led trade war against Beijing pushedChinese manufacturers into recession last year. Although figures are improving, the country’s factory base is still struggling.

China isn’t the only major economy to be running on stimulus. Central banks around the worldslashed interest rates times in

as policymakers sought to prop up weak economies through conventional easing measures. Inflows into all kinds of fixed-income funds rose every single week throughout the year, marking the largest expansion in almost two decades.

Excessive stimulus in China, the United States and other parts of the world has led some analysts to declare thatglobal markets are in a dangerous bubble. Nobel Laureate Robert Shiller has already warned of“bubbles everywhere” in today’s market. Other analysts believe conditions are ripe for a major market downturn as early as this year.

Scott Minerd of Guggenheim Partners says current market conditions are a lot like (just before the (S&P) ************************************************** shaved nearly****************************************** (%) **************** (over a) ********************************************************** – day correction. Like others, Minerd says the Federal Reserve is propping up America’s expansion but can only do so much to prevent the inevitable downturn.

The Fed capitulated to Donald Trump last year by cutting interest rates three times. It has also stepped up efforts in the overnight lending market, including conducting thelargest-ever repo operation

This article was edited byJosiah Wilmoth (******************************. ****************************

Last modified: January 2, (****************************************************************: (UTC) *******

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