Wall Street, Global Markets Bounce Back On China's Rate Cut

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Trader on the New York Stock Exchange floor
Wall Street futures are up slightly Friday morning after a week of heavy losses.

Wall Street pointed toward gains before the opening bell Friday after a surprise interest rate cut from China lowered, at least temporarily, the anxiety over a slowdown in the world's second-largest economy.

Futures for the Dow Industrial Average climbed 1% and the S&P 500 rose 1.2%. Major benchmarks will need much bigger gains by the close to avoid a seventh straight week of losses for markets shaken by rising interest rates, a global pandemic and war in Ukraine.

Shares in Europe and Asia also rose.

U.S. markets fell closer to bear territory after Thursday's declines with major benchmarks down around 3% for the week heading into Friday trading.

“This is unlikely to be rock bottom, given the tightening of financial conditions ahead,” said Tan Boon Heng of Mizuho Bank in a report. “Reality may again be harsher than expectations.”

In Asia, the Shanghai Composite Index rose 1.2% to 3,134.21 after the Chinese central bank reduced its rate on a five-year loan, which would shore up weak housing sales by cutting mortgage costs. The one-year loan rate that affects commercial borrowers was left unchanged.

That suggests Beijing is “trying to keep easing targeted and that we shouldn’t expect large-scale stimulus,” said Julian Evans-Pritchard of Capital Economics in a report.

The Nikkei 225 in Tokyo jumped 1.3% to 26,746.24 after Japanese consumer inflation rose to 2.5% in April from the previous month’s 1.3%. It was the first time since 2008 that inflation was above the central bank’s 2% target.

Investors are watching the Federal Reserve for hints of more interest rate hikes to cool inflation that is running at a four-decade high. Fed Chair Jerome Powell said this week the U.S. central bank might take more aggressive action if price pressures fail to ease.

Traders also are uneasy about China’s economy following official data that showed factory and consumer activity in April were weaker than forecast after Shanghai and other industrial centers shut down to fight coronavirus outbreaks.

Additional reporting by The Associated Press.