Tuesday 13.00 BST:US stock futures are down nearly 1 per cent after China delivered a shock increase in bank borrowing rates in an effort to cool speculative lending. Earlier in the global session it had been a case of finance jocks versus tech geeks in the battle for sentiment.
The FTSE All World-index is down 0.4 per cent and the dollar is rallying for the third consecutive session. Commodities are sliding on worries about lower demand and the buck’s advance.News that the Peoples’ Bank of China had hiked rates by 25 basis points will raise fears that Beijing’s attempts to slow the pace of economic growth will crimp activity globally and dent insipid recovery in the US and Europe.
Bank of America and Goldman Sachs today joinedCitigroupin delivering third quarter results that have cheered investors. The better news from the banks pulled S&P 500 futures off their overnight lows.
They had been pushed south by poorly received results statements from Apple and IBM after Monday’s closing bell, which saw the tech giants drop 6 and 4 per cent respectively in out-of-hours trading.
For the time being, however, the earnings catalysts are being overwhelmed by monetary factors. The PBOC’s tightening sits in stark contrast to the Fed’s imminent easing, a strategy that is seen at the centre of latest skirmishes in the"currency wars”
Timothy Geithner, US Treasury secretary,said that currency devaluation "is not a viable, feasible strategy and we will not engage in it ". The comments were seen as being designed to head off criticism ahead of this weekend’s meeting of finance ministers and central bankers from the Group of 20 nations in South Korea, at which currencies are expected to be on the top of the agenda.
But the World Bank has now taken up the cudgels. It warned on Tuesday that ultra-loose US monetary policy is causing a surge of capital inflows into Asia and threatening the region’s economic stability.
"If this liquidity abundance is sustained and increases, I think they [East Asian countries] are going to have to take further action,” said Vikram Nehru, the World Bank’s chief economist for Asia-Pacific.