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Markets cheer China stimulus: Understand the impact of rate cuts on global assets

Moomoo Learn joined discussion · Sep 24 16:35

The US Federal Reserve initiated its easing cycle with 50 basis points rate cut last week. This week, Chinese markets joined the trend on Tuesday by cutting the rate by 50 basis points. This decision sparked a rally, with the $Hang Seng Index (800000.HK)$ and $SSE Composite Index (000001.SH)$ rising more than 4% in a single day. On the same day, the Reserve Bank of Australia left its cash rate unchanged at 4.35%. However, according to a Bloomberg survey, the RBA is expected to begin its easing cycle next year.

Source: moomoo

Interest rate cuts are generally viewed as supportive for stock markets because they increase market liquidity and stimulate economic expansion.

Given that the upcoming global rate cut cycle will have a pivotal impact on investments, it is crucial to understand the underlying relationship between rate cuts and global assets.

Markets cheer China stimulus: Understand the impact of rate cuts on global assets

Reflecting on the last round of rate cuts, the "Magnificent Seven" stocks did not show significant rebound one month after the rate cut. However, substantial gains were observed over longer periods of 6 months and 12 months.