Global stocks on edge af­ter Chi­nese rate rise

The Pak Banker - - I Nternational -

LONDON: Chi­nese shares slid and Euro­pean stocks fol­lowed suit on Mon­day as the im­pact of China's Christ­mas Day in­ter­est rate rise sunk in to thin mar­kets.

Chi­nese shares dropped 1.9 per­cent af­ter the Peo­ple's Bank of China raised in­ter­est rates on Satur­day for the sec­ond time in just over two months.

Euro­pean stocks were 0.7 per­cent lower by 1025 GMT (5:25 a.m. ET) in trad­ing pared to the bone by a mar­ket hol­i­day in Bri­tain.

The PBOC said it would raise the bench­mark lend­ing rate by 25 ba­sis points to 5.81 per­cent and lift the bench­mark de­posit rate by 25 ba­sis points to 2.75 per­cent.

An­a­lysts ex­pect more to come in 2011 as the Chi­nese au­thor­i­ties bat­tle to keep a lid on in­fla­tion, which hit a 28month high of 5.1 per­cent in Novem­ber.

"Our econ­o­mists had ex­pected a rate rise be­fore the end of the year, but re­leas­ing the news on Christ­mas Day it­self came as a lit­tle sur­prise to the mar­ket," said Chen Xin Yi, as­so­ci­ate vice pres­i­dent at Bar­clays Cap­i­tal in Singapore.

"Nev­er­the­less, we be­lieve that the well-cal­i­brated tim­ing re­flects con­sid­er­a­tion for min­i­miz­ing un­wanted fi­nan­cial mar­ket volatil­ity and re­duc­ing po­ten­tial cap­i­tal move­ment to the ex­tent pos­si­ble." -Ap

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