China’s central bank joins the easing party…

Adding to the euphoria in equity markets on Friday was the surprise cut in interest rates from China’s central bank, the People’s Bank of China. The one-year benchmark lending has been cut 40bps to 5.6% while the equivalent deposit rate was cut 25bps to 2.75%. This is the first interest rate cut in two years and a reflection of the deteriorating economic outlook. However, in the near term it is likely to be positive for Chinese equities, as investors continue to follow the lead of central banks.