Stock markets under a cloud amid debt crisis
ers behind the global economy’s recovery from the downturn. So investors were unsettled Friday when China moved to raise its reserve rate by half a percentage point, which would require large banks to set aside more cash, which in turn would leave less money to lend out.
While investors may have been dismayed at the news, analysts said it was the right thing for China to do in order to keep economic growth strong.
“They have been doing some jawboning to cut back on lending, and now they’re increasing reserve requirements, they’re not making big adjustments in their currency or in interest rates,” Johnston said.
“They could make a mistake and we could have a sharp downturn in the Chinese economy — but that’s not the strategy. They’re shooting for some kind of moderation in growth that will help restrain inflation.”
The rally on stock markets started almost a year ago and was based on the conviction that the recession would end later in 2009 and an economic recovery would be in place by the end of the year.
Now, it’s a bit more difficult to see what this year is going to be like.
But Johnson pointed out that the important signals are at least pointing in the right direction.
“The economic numbers show a building case for sustainable growth, so it suggests the pessimists are too pessimistic,” he said.
“But the numbers also don’t say, this is going to rock and roll here.”
The Toronto stock market will be closed today for the Ontario Family Day holiday, while New York markets will be shuttered Monday for Presidents Day.