The Chinese central bank has made a move to loosen its monetary policy, which sent boosts within the stock market. The other cause of positivity in the stocks is the reducing fear amongst investors concerning Omicron, a Covid-19 variant.
The Dow Jones Industrial Average rose gained 534 points, a 1.5% rise, building on a 646 point gain from Monday when it closed at 35,227. The S&P 500 gained 2%, while the technology-stock-heavy Nasdaq composite surged 2.8%. It’s been reported that the Dow Jones Industrial Average is having its best first five days of December since 1997.
“A Chinese RRR (Reserve Ratio Requirement) cut, promises of further support for the economy and hey, presto, the mood is lifted, as if by magic,” wrote Societe Generale’s Kit Juckes.
On Monday, the People’s Bank of China announced that it would cut the percentage of cash banks are required to hold in reserve from 8.9% to 8.4%. This move alone freed up an estimated $200 billion for lending. While China continues to combat a slowing economy, the effects of this move were felt across the globe.
The announcement by the People’s Bank of China also runs contrary to the moves made by other central banks, most notably the Federal Reserve and the European Central Bank. The Federal Reserve announced a policy shift that will lift short-term interest rates and long-term bond yields; on the other hand, The European Central Bank could hike interest rates in 2022.
All this has positively influenced the stock market but has been amplified by the news that countries around the globe are unlikely to return to lockdown as a result of the Omicron variant. News has been shared that the variant is unlikely to cause severe illness, and GlaxoSmithKline (ticker: GSK) reported that its Covid-19 antibody treatment would be effective in treating the variant.
Hong Kong’s Hang Seng Index rose 2.7% in overseas markets, and the pan- European Stoxx rose 2.2%. The positive news seems to have influenced other sectors such as oil. Oil prices which had been under intense pressure since Black Friday due to fears of lower demand due to possible “omicron inspired” lockdown measures, have risen on the back of this general upbeat mood.
Futures contracts West Texas intermediate crude rose more than 3% to $72 a barrel.
Intel (INTC) rose 5.5% after the news was released that the chipmaker would be taking its Mobileye self-driving car unit public.
Alibaba (BABA) rose 1.7% after a 10.4% rally on Monday. Shares in the e-commerce giant have been under intense pressure lately, owning to the poor quarterly results and general fear of further restrictions on Chinese U.S listed companies by regulators.
Nvidia (NVDA) rallied 3.8%, with the maker of graphics processing units paring losses from a near 10% slide across that previous five days.
MongoDB (MDB) stock rallied 3.8% after the company reported a loss of 11 cents a share, which beat the expected loss of 38 cents a share. The company reported sales of $227 million, way above the expected $205 million.