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Stocks climb after China rate cut

Chinese economic data showed the woes inflicted from Beijing's strict zero-Covid policy, with retail sales and factory production slumping to its lowest in over two years. ©AFP

London (AFP) - Global stocks rebounded Friday on China's interest rate cut, after having slumped the previous day on fears that sky-high inflation would spark a global downturn.

"Markets have been looking for an excuse to bounce, and a China rate cut provided the reason," IG analyst Chris Beauchamp told AFP.

"It isn't much when set against the broader (rate) tightening we are seeing globally, but equities do look a bit stretched to the downside in the short term."

China's central bank announced it would lower its five-year loan prime rate -- a key interest rate governing how lenders base their mortgage rates -- to 4.45 percent from 4.6 percent.

That injected optimism among traders that it could boost the world's second-largest economy from Covid-induced stupor.

"The rate cut announced by the PBOC (People's Bank of China) is obviously good news and is clearly targeted at revitalising the ailing property market which continues to suffer due to the crackdown last year and Covid lockdowns this," said Craig Erlam, senior market analyst at OANDA.

"This could help to revive a hugely important part of the economy," he added, but "whether it's enough to help China hit its 5.5 percent growth target this year is another thing." 

The news comes in contrast to other major central banks -- like the US Federal Reserve and the Bank of England -- that are raising borrowing costs to combat rocketing consumer prices.

European equities were buoyed Friday also by a surprise jump in UK retail sales last month, despite the nation's inflation striking a 40-year peak of nine percent.

"European markets are staging gains to round up a hectic week for markets," said Victoria Scholar, head of investment at trading firm Interactive Investor.

Rollercoaster ride

Markets had taken a beating Thursday on intensifying recession worries.

Wall Street has faced the brunt of selling, suffering its worst batterings in two years over the past couple of sessions.

Downcast earning reports from retailers have heightened market uncertainty at a time of rising interest rates, surging energy prices, China's Covid lockdowns and Russia's ongoing war on Ukraine.

"It has been a rollercoaster ride for markets this week after Thursday's bloodbath when US equities suffered their worse session since 2020 with that negativity reverberating across global stock markets," added Scholar.

World oil prices were steady as traders paused for breath at the end of a volatile trading week.

In Paris, shares in French power firm EDF rose 2.5 percent to 8.50 euros despite announcing even more delays and vast cost over-runs for its planned giant nuclear plant in southwest England.

The firm revealed Thursday that the cost will balloon to as much as £26 billion -- and not begin generating electricity until June 2027.

Hinkley Point C, which aims to provide seven percent of Britain's total power needs, had previously been expected to cost up to £23 billion with a start-up date of one year earlier.

EDF said in its statement that there would be no additional cost to British consumers.

Key figures at around 1330 GMT

London - FTSE 100: UP 1.7 percent at 7,426.39 points

Frankfurt - DAX: UP 1.6 percent at 14,108.73

Paris - CAC 40: UP 1.2 percent at 6,348.12

EURO STOXX 50: UP 1.4 percent at 3,692.06

New York - Dow: UP 0.5 percent at 31,417.93

Hong Kong - Hang Seng Index: UP 3.0 percent at 20,717.24 (close)

Shanghai - Composite: UP 1.6 percent at 3,146.57 (close)

Tokyo - Nikkei 225: UP 1.3 percent at 26,739.03 (close)

Brent North Sea crude: UP less than 0.1 percent at $112.09 per barrel

West Texas Intermediate: UP less than 0.1 percent at $112.per barrel

Euro/dollar: DOWN at $1.05 from $1.0588

Pound/dollar: UP at $1.24 from $1.2467

Euro/pound: DOWN at 84. pence from 84.93 pence

Dollar/yen: UP at 127.yen from 127.79