China’s interest rate cut on Sunday was applauded enthusiastically by investors as an encouraging step towards bolstering the country’s faltering economy.
The cut in interest rates was China’s third in six months and analysts are predicting that policymakers will cut rates again in the next few months. Meanwhile, Chinese shares rallied, erasing earlier losses. The CSI300 index, one of the largest listed companies in Shanghai and Shenzhen, rose 2 percent, while the Shanghai Composite Index climbed 2.1 percent.
At the same time, however, the cut in interest rates has awakened worries of a slowdown in China’s labor market.
According to Uwe Parpart, head of research and chief strategist at Reorient Group, "The PBOC (People's Bank of China) move validates investors' assumption that sub-par economic performance will be tolerated by the government only up to a point where it does not pose a serious threat to employment." Parpart continued, "That point may well have been reached."
Eurogroup Meets
Meanwhile, the Eurogroup’s finance ministers meet today and Greece's government is still hopeful that some progress with Athens’s lenders will be felt. More aid to Greece does not seem forthcoming with ministers indicating that there are still too many outstanding issues.
"Greek-related headlines have begun filtering out over the weekend, and the debt negotiations will be one of this week's currency themes. Today's Eurogroup meeting and its impact on the euro will be in focus," said Shinichiro Kadota, chief Japan forex strategist at Barclays in Tokyo.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.4 percent. Japan's Nikkei share average ended up 1.3 percent, moving slightly from last week's one-month low.
Continued worries over Greece’s economic situation kept European stocks at a slow pace at opening.