This morning big news came out of China, where the central bank ordered local banks to limit their lending. This is yet another attempt by the government to control its borrowing costs, which have increased over the past year due to the coronavirus pandemic.
Recall that China was the only major economy in the world that registered growth in 2020, but that did come at the expense of massive borrowing, which the central bank is now trying to contain.
The immediate consequence of the decision was a blow to Chinese stock indices, with both the Shenzhen CSI 300 and Chinext down today. This happened despite China delivering slightly better PMI reports today.
United States stock indices will also trade lower today, but not due to any negative factors. Rather, indices have grown too fast since last week’s non-farm payrolls drove a rally, and today they will be taking a deep breath and consolidating. The rally will most probably resume very soon, perhaps as early as tomorrow.
A company whose stock will likely take an especially bigger dip today is Credit Suisse. Due to its involvement in poor investments in Archegos and Greensill Bank, Credit Suisse will lose between five and six billion dollars, which is close to the bank’s entire annual profit last year. All senior staff responsible for the investments have been fired.
Meanwhile, oil prices are stabilizing after their recent decrease caused by OPEC's decision to ramp up oil supply in Q2. The risk of oversupplying a global market still in crisis was cushioned by the prospect of a speedy recovery in the United States and China, which could result in greater demand for oil. The Brent crude is trading around $63.47, while the WTI is near $60 per barrel today.
In a still relatively quiet day in the financial markets, the Reserve Bank of Australia decided to leave interest rates unchanged at 0.1% at its policy meeting.
In another highlight, Europe reported some disappointing labor data for February. The unemployment rate in Italy stayed at 10.2% that month instead of dropping to 9% as expected. The eurozone-wide jobless rate was also higher than anticipated at 8.3%.
