Global stocks on edge after Chinese rate rise
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