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China Pumps $109 Billion Into Economy Amid Trade War With US

10 October 2018

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.3 percent, after major stock markets around the world fell for a second straight day on Friday.

China's central bank announced Sunday it would reduce the reserve requirement ratio (RRR) for most banks by one percentage point, the fourth time this year the country has sought to free up credit for businesses as they face down $250 billion in United States tariffs.

Yields on the 10-year U.S. Treasury note were at seven-year highs after a solid U.S.jobs report last week raised the likelihood of faster interest rate hikes.

Chinese stocks plunged Monday, with the China A50 index losing more than 4.8% in trading. "And today's fall is not surprising after weak performance in external markets during the holiday". On Friday, Chinese technology stocks listed in Hong Kong, including Lenovo and ZTE, slumped on a media report that the systems of multiple U.S. companies had been compromised by malicious computer chips inserted by Chinese spies. The yuan market at 0414 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.8571 6.844 -0.19% Spot yuan 6.8703 6.861 -0.14% Divergence from 0.19% midpoint* Spot change YTD -5.29% Spot change since 2005 20.47% revaluation Key indexes: Item Current Previous Change Thomson 92.76 92.87 -0.1 Reuters/HKEX CNH index Dollar index 94.143 94.133 0.0 *Divergence of the dollar/yuan exchange rate.

Hong Kong's Hang Seng slumped 4.4 per cent last week as investors anxious about the escalating trade row between the United States and China.

Real estate, consumer and healthcare sectors were also among the biggest casualties, all tumbling more than 4 percent. However, it has since stabilized with the PBoC increasing liquidity support and maintaining ample liquidity. "Liquidity is not the issue".

The "very timely" RRR cut is big enough to help boost confidence in the economy, said Xu Hongcai, deputy chief economist at the China Centre for International Economic Exchanges, a Beijing think tank.

European markets were also set to weaken, with financial spreadbetters expecting the FTSE to open 0.07 percent lower, Frankfurt's DAX down 0.03 percent, and Paris' CAC down 0.1 percent.

"Whether it is just in response to the weight of evidence from the strong USA data or instead an active decision by Fed officials to steer the market more towards its tightening profile (the "dots") presented at its rate decision last month, there is little doubt that officials have turned more hawkish recently", analysts at ANZ said in a note.

The 30-year Treasury bond reached a four-year high of 3.424 percent, and was at 3.4054 percent at the US close on Friday. China's yuan was weaker at 6.8979 per USA dollar at 0333 GMT, compared with a previous onshore close of 6.8725 per dollar.

Sixteen strategists see the yuan weakening to 7 to the dollar or higher at some point over the 12-month period, the highest number of respondents in the Reuters poll predicting that since August 2017.

China stocks rebounded on Tuesday morning from Monday's sharp losses as authorities took further steps to support the economy and contain the effects of an escalating trade war with the United States.

China Pumps $109 Billion Into Economy Amid Trade War With US