US Stock Market Overview – Stocks Rally on PBOC Rate Announcement

The VIX tumbles as stocks surge
David Becker

US stocks surged on Thursday the first trading day of the new year as the People’s Bank of China announced that the central bank would further loosen monetary policy by reducing the amount of reserves banks needs to keep on hold at the central bank. The stimulus would help commercial banks ease lending requirements on corporations, which would help buoy Chinese equities. Investors were also upbeat that the US and Chinese would sign a trade deal on January 15, according to US authorities, but CNBC reported that Chinese officials have yet to announce they would sign a deal on January   15, and are still in the process of translating their version of the deal into English. This has helped buoy gold prices.

The VIX volatility index tumbled as stocks surged, falling by more than 8% below 13. US jobless claims declined by 2,000 on Thursday ahead of the government’s report on nonfarm payrolls. Sectors in the S&P 500 index were mixed, driven higher by Technology shares. Real estate and utilities bucked the trend declining as yields dipped.

Jobless Claims Declined

The labor department reported that Initial claims decreased 2,000 to 222,000 for the week ended December 28. Expectations were for jobless claims to rise by 1,000 to 225,000. The four-week moving average of initial claims rose by 4,750 to 233,250, the highest level since January 2018.

The PBOC Reduces Reserve Rate Requirements

The People’s Bank of China announced a 50 basis point cut in the required reserve ratio for bank effective Monday, January 6.  The change in reserve requirement will release an estimated 800 in Chinese yuan and reduce banks’ funding costs, which in turn is expected to be passed on to corporate borrowers.  This suggests the benchmark one-year Loan Prime Rate will likely fall.  The required reserves ratios are set currently at 13% for large banks and 11% for smaller banks.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.