World stocks fall after China rate move, euro up

08:38, December 28, 2010      

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Chinese stocks fell sharply, European stocks dipped, US stock closed marginally lower, and the dollar lost ground to the euro in trade on Monday, partly impacted by China's Christmas Day interest rate hike.

China's stocks tumbled on speculation the central bank will accelerate increases in interest rates. The benchmark Shanghai composite stock index lost 1.9 percent to close at 2,781.40, the lowest in three months.

The 25 basic-point benchmark one-year rate increase by the People's Bank of China, the central bank, was the second in just over two months, and while the timing just before year-end may have been a surprise among investors, the move itself was not. China's leaders have pledged to make fighting inflation a top priority in 2011, although it could mean a relatively slower growth of its GDP.

Global oil prices dipped to just a little above 90 dollars per barrel after briefly hitting a 26-month peak of nearly 93 dollars a barrel, as the Chinese rate hike raised fears of slowing demand. Gold prices ended down, too.

The week between Christmas and New Year's is typically considered "the Santa Claus rally time" for stocks, and analysts estimate that investors are expected to come back to markets and buy shares this week.

On Wall Street, the Dow Jones industrial average fell 18.46 points, or 0.16 percent, to 11,555.03. The Nasdaq Composite Index rose 1.67 points, or 0.06 percent, to 2,667.27.

China's central bank Saturday announced a hike in the benchmark one-year lending rates by 25 basis points to 5.81 percent and an increase in the benchmark deposit rate by 25 basis points to 2.75 percent.

The euro rose after shaking off losses below its 200-day moving average. It was last up 0.36 percent at $1.3162. against the yen, the dollar fell 0.08 at 82.79 yen.

In commodities markets, oil prices pulled back from a 26-month high in response to China's action, which countered the influence of severe cold weather in the United States and Europe.

People's Daily Online
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