Stock markets mixed on Chinese stimulus, stronger sterling

LONDON — Global stock markets were mixed on Monday after China unveiled fresh stimulus measures and below-par US jobs data reinforced expectations the Federal Reserve (Fed) would cut interest rates this month.

London equities fell on a rising pound however, the result of official data that showed the British economy grew by 0.3 per cent in July, reducing the likelihood of a UK recession this year as Brexit looms large.

Sterling also won support ahead of a critical vote on an early UK general election.

French shares were also a shade lower, while in Frankfurt the DAX index showed modest gains in afternoon trade.

As markets opened in New York, the Dow was slightly stronger, gaining 0.1 per cent.

Elsewhere, the euro wavered as dealers mulled speculation that the European Central Bank could decide this week to loosen monetary policy.

“One broad theme is the prospect of monetary stimulus, which may be propping up some markets today,” said City Index analyst Fiona Cincotta.

But “there are significant fears that the global economy is running out of puff,” she added.

Sterling jumped more than half-a-percentage point against the dollar, pushing down London’s benchmark FTSE 100 index which features numerous multinationals with earnings in the US unit.

“While parliament seems to be falling apart, the economy is holding up reasonably well,” noted Paul Dales, chief UK economist at research consultancy Capital Economics.

“July’s surprisingly strong rise in GDP suggests that it has not fallen into a recession.”

Most Asian markets ended on a positive note, building on last week’s gains after China unveiled fresh stimulus measures and below-par US jobs data reinforced expectations the Fed will cut interest rates this month.

The Feds’s Open Market Committee is due to meet on September 17-18.

The People’s Bank of China said on Friday that it would slash the amount of cash lenders must keep in reserve to its lowest level in 12 years, freeing up more than $100 billion for the stuttering economy.

Asian investors were broadly upbeat on the move.

The US economy, meanwhile, appears to have been affected by the trade row with China and central bank boss Jerome Powell said Friday that the Fed will “continue to act as appropriate” to sustain growth, which he said now faced “significant risks”.