US Stock Market Overview – Stocks Rally on Chinese Easing, All Sectors Rise

Equity markets rebounded on Monday following news that the Chinese central bank was making changes to its policy. White House staff along with the President were on the tape this past weekend, saying that the economy was in good shape. At the same time, President Trump is saying that he wants to Fed to reduce interest rates, saying his choice to lead the Fed Jerome Powell was clueless. The Fed chair will speak at Jackson Whole Wyoming this week, providing the markets with some insight into future rate cuts. All sectors were higher led by robust gains in Energy and Cyclicals, Utilities were the worst performers in a good tape.

The PBOC Modifies Lending Rates

The PBOC, The People’s Bank of China (PBOC) said it will improve the mechanism used to establish the loan prime rate in a move to further lower real interest rates for companies. The move underscores the government’s attempts to use reforms to support a slowing economy. The central bank will improve the efficiency of interest rate transmission, and lower financing costs which should help buoy economic growth. Chinese banks’ new LPR quotations will be based on rates of open market operations, and the national interbank funding center will be authorized to publish the rate. The central bank said five-year and longer tenors will be added to the existing one-year LPR, which will help banks set rates on long-term loans such as mortgages. The move followed pledges from China’s State Council on Friday that the country will rely on market-based reform measures to help lower real interest rates for companies.

Trump Continues to Hammer Powell Ahead of Jackson Hole

The president continue to rip Fed Chair Jerome Powell saying the the Fed Chair was “clueless” after markets dropped last week. This was the latest in a string of disparaging remarks from Mr. Trump since appointing Mr. Powell to lead the Fed. Mr. Trump has lauded economic systems, such as in China, where central banks are under tight control, a view that has raised worries among current and former Fed officials. If the President had it his way the Fed would cut rates to zero boosting the economy and providing Trump with the leverage he needs to outlast President Xi of China in their trade battle.