Investment market update
UK equities are expected to open lower this morning, as China’s stock market regains ground but global investor fears persist.
Chinese shares were up amid volatile trade as traders gauge the effect of a fresh rate cut by the central bank. The mainland’s benchmark Shanghai Composite was 3.1% higher. On Tuesday, China’s central bank cut its key lending rate by 0.25% to 4.6% in an effort to calm stock markets.
Wall Street shares have closed lower again after a sharp rally fizzled out in the last hour of trading. The surprise reversal came despite China’s decision earlier to cut its main interest rate. Analysts blamed fragile investor confidence for the volatile trading and said continuing fears over China’s economy had eventually overruled the initial low values which persuaded investors to buy.
A rally in commodity producers spurred a rebound in UK stocks of 3.1%. BHP Billiton Ltd. climbed 5.5% after saying it will raise its dividend. The world’s biggest miner fell the most since 2008 on Monday. Antofagasta Plc and Glencore Plc also rose. RSA Insurance Group Plc advanced 3.9% after Zurich Insurance Group AG said it plans to buy the company.
Traders and investors have been betting for months that the Federal Reserve will raise interest rates in September or December. October, the only other meeting on the 2015 calendar, was not part of the conversation, mainly because there’s no press conference scheduled along with the central bank’s interest-rate decision that day. Now that may be changing for some analysts after the recent financial-market turmoil. September may be too soon, and December is problematic in the eyes of some investors because liquidity in financial markets tends to dry up at that time of year.
The UK government’s ‘Help to Buy’ program boosted the housing market and the broader economy. The initiative, which encouraged a new category of buyers with a 5% deposit, increased demand for homes, but eventually supply failed to keep up. The subsequent surge in house prices, combined with Bank of England mortgage caps, constrained affordability.