Global stocks decline on rate hike

11:27, April 06, 2011      

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Global stock markets skipped down Tuesday by an abrupt interest rate rise in China, lingering concerns about Japan's nuclear catastrophe and another downgrade of Portugal's credit rating.

In Europe, the FTSE 100 index of leading British shares was down 0.4 percent at 5,994 while Germany's DAX fell 0.3 percent to 7,153. The CAC-40 in France was 0.6 percent lower at 4,021.

Japan's benchmark Nikkei 225 index led the retreat, dropping 1.1 percent to 9,615.55, amid frantic and unsuccessful efforts to control a radioactive leak at a nuclear plant damaged by the March 11 monster earthquake and tsunami.

The Reserve Bank of Australia kicked off a raft of statements this week earlier by keeping its benchmark rate unchanged at 4.75 percent, followed soon after by the decision by the People's Bank of China to raise its key interest rate by a quarter percentage point as it looks to fight inflation. The hike, once again, was delivered when China was on holiday.

While the European Central Bank is widely expected to raise interest rates too, there's more uncertainty about what the Bank of England will do, with most economists predicting it will leave borrowing rates unchanged.

The U.S. Federal Reserve will also be in the spotlight later Tuesday when the minutes to the last rate-setting meeting are published. Investors will be looking to see if there are any signs of the central bank ending its current $600 billion monetary injection before June, and whether interest rates may start to rise sooner than the markets expect.

If the minutes do suggest that the Fed is sounding a more hawkish tone, analysts said the dollar could garner some support on views of higher future returns. Stocks may also suffer as higher interest rates tend to weigh on growth.

People's Daily Online / Agencies
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