Markets divided as China's rate cut fails to calm worries

Global markets displayed a mixed picture on Monday as China's latest move to lower interest rates did little to assuage investors' growing concerns about the outlook of the world's second-largest economy.

Investor sentiment has taken a hit this month due to a series of disappointing data releases from Beijing, signalling a derailing of the post-COVID recovery.

Adding to the pessimism is speculation that the US Federal Reserve could continue tightening monetary policy and maintaining elevated rates, as it strives to bring inflation down to its two percent target.

Wall Street provided a subdued lead, turning attention to the upcoming symposium in Jackson Hole, Wyoming, where prominent central bankers and business leaders will convene this week. Traders are anticipating insights on the trajectory of interest rates.

"Based on recent commentaries, central bankers seem inclined to retain the option to increase rates further, while refraining from committing to imminent rate cuts," noted Redmond Wong at Saxo.

While the Federal Reserve and other central banks deliberate on potential rate hikes, the People's Bank of China (PBOC) announced another interest rate reduction on Monday, aiming to reignite the faltering economy.

This decision pertained to lowering the one-year loan prime rate, a key marker for corporate loans. It follows a reduction in June and maintains the rate at a historic low. However, the PBOC refrained from altering the five-year LPR, which influences mortgage rates. The magnitude of the reductions was also smaller than expected by analysts.

Nevertheless, the announcement failed to mollify anxious investors who are calling for more concrete measures to stimulate economic growth.

While assurances of economic revitalisation have been given, specifics remain scant.

Hong Kong remained the hardest hit, extending its seven-day decline and falling over 20 per cent from its January peak.

Shanghai joined the downward trend, along with Sydney, Singapore, and Wellington. Conversely, Tokyo, Seoul, Mumbai, Bangkok and Jakarta experienced gains.