China raises interest rates pushing global stocks downward
The People's Bank of China used Christmas Day as the time to raise interest rates. Shanghai's benchmark stock index fell 1.9% on the day, down 15.1% year-to-date as investors have been anticipating tighter lending policies by the central bank in an effort to slow rising inflation.
European stock markets fell in response to China's move, although with the UK on holiday until Wednesday, trading activity was limited. Global share prices were mostly lower on Monday but are still hovering near highs of more than two years. Commodity prices were mixed, with oil off a 26 month peak, gold down marginally but grain prices generally stronger.
"In the long run, this is going to be healthy for the Chinese economy, but the instinctive market reaction is that this is going to be bad for global demand, giving investors a reason to sell off equities," said Quincy Krosby, market strategist with Prudential Financial in Newark, New Jersey.
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