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China’s Interest Rate Hike Rattles Global Markets

Posted October. 21, 2010 11:21,   

한국어

China’s surprise interest rate hike Tuesday has rattled financial markets, fueling investor worry that the world’s second-largest economy could slow and crimp the global economy.

Oil and other commodities, all affected by the global economic outlook, also declined.

Korean stock markets quickly rebounded after a drop, however, in stark contrast to other major markets.

Stocks were sharply lower in the U.S. and Europe. The Dow Jones Industrial Average fell 165.07 points (1.48 percent) Tuesday to close below 11,000. In London, the FTSE went down 0.67 percent while the CAC40 in France and DAX in Germany dipped 0.71 percent and 0.39 percent, respectively.

While the impact of China’s rate hike was considerable, experts say it was not as strong as the one in April 2004, when Prime Minister Wen Jiabao announced economic tightening and sent global financial markets into a tailspin.

In Korea Wednesday, the benchmark KOSPI fell 1.09 percent to 1,837.08 in early trading but gained 0.71 percent to close at 1,870.44. The won-dollar exchange rate started the day 9.5 points higher at 1,140 but rapidly stabilized afterwards to close at 1,126.90, down 3.6 points from Tuesday.

While China has launched an exit strategy, Japan is maintaining economic stimulus measures. The major Japanese daily Asahi Shimbun said Tokyo revised down its economic assessment to “stagnant” from “recovery,” while Bank of Japan Gov. Masaaki Shirakawa hinted at expanding quantitative easing policy.



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