Traders at the New York Stock Exchange. — AFP
Major stock markets experienced declines on Monday due to profit-taking and a surge in oil prices, as traders assessed fresh interest-rate cuts by China's central bank aimed at revitalizing the world's second-largest economy. Despite a record session on Wall Street on Friday, which marked a sixth consecutive weekly gain, this momentum did not carry over into Monday, preventing a similar rally in other markets.
"The weaker -- but not weak -- disposition is flowing from a posture of strength in the major indices that has invited some selling interest after some big gains," noted Briefing.com analyst Patrick O'Hare in a client note. Investors are also waiting for the next round of corporate earnings, with Alphabet, IBM, and Tesla scheduled to report their third-quarter figures this week. Additionally, Boeing, Coca-Cola, General Motors, and L'Oreal are set to release their earnings.
Oil prices, which fell more than eight percent last week, received support from Middle East unrest and expectations of increased demand from China, the world's leading crude importer. "The idea is that the move (on Chinese rates) will encourage lending and spending and help mend the ailing property market," said Susannah Streeter, head of money and markets at Hargreaves Lansdown. However, there are still expectations that further fiscal stimulus will be necessary.
China's central bank announced on Monday that it had cut two key interest rates to record lows as part of an official effort to boost spending and achieve a five-percent annual economic growth target. This decision follows last week's data showing that China's economy expanded at its slowest quarterly pace since the start of 2023, although it still exceeded forecasts. Beijing has recently introduced measures to revive the economy, including rate cuts, eased home-buying rules, and pledges to support equity markets.
These announcements initially sparked a significant rally in mainland and Hong Kong stocks, but some gains have since been erased due to a series of disappointing news conferences that failed to provide detailed or meaningful measures. "Officials are gradually ramping up support to kick-start the economy -- but the will-they-won't-they of announcements has made the process a rollercoaster for markets," Moody's Analytics stated on Monday. However, Trade Nation analyst David Morrison noted that the oil market's momentum remains downward.
In foreign exchange, the dollar strengthened against other major currencies. "The US dollar continues to find some love against the other majors," said Morrison, attributing this to the shifting probabilities of a slowdown in monetary policy easing from the Federal Reserve and the possibility of a quicker pace of rate cuts from both the European Central Bank and the Bank of England.
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