Markets Get Early Christmas Gifts; Stocks Surge
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Tell your kids there is a Santa Claus.
The markets got three early Christmas gifts Wednesday, and stocks are surging. First, China lowered the reserve ratio on banks. Next, the Fed and five other central banks announced a coordinated effort to boost liquidity. Finally, a report from Automatic Data Processing showed better than expected jobs growth.
Stock futures are pointing to a much higher open. Dow Jones futures are up 262, Nasdaq 100 is up 56 and the S&P 500 is up 33.
The People's Bank of China said it will cut the amount Chinese banks have to set aside for reserves by 50 basis points effective December 5. Before today's reversal, China raised the reserve requirement six times this year to a record 21.5 percent for the biggest lenders. This was the first such cut since 2008 and was likely promoted by the weakness coming from Europe.
Adding to the upside in markets, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. These central banks have agreed to lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements by 50 basis points so that the new rate will be the U.S. dollar overnight index swap rate plus 50 basis points.
"The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity," the Fed said.
The employment picture also appears to be improving.
ADP's National Employment survey showed that employment in the nonfarm private business sector rose 206,000 from October to November. Economists were expecting a November reading of just 130,000.
The markets got three early Christmas gifts Wednesday, and stocks are surging. First, China lowered the reserve ratio on banks. Next, the Fed and five other central banks announced a coordinated effort to boost liquidity. Finally, a report from Automatic Data Processing showed better than expected jobs growth.
Stock futures are pointing to a much higher open. Dow Jones futures are up 262, Nasdaq 100 is up 56 and the S&P 500 is up 33.
The People's Bank of China said it will cut the amount Chinese banks have to set aside for reserves by 50 basis points effective December 5. Before today's reversal, China raised the reserve requirement six times this year to a record 21.5 percent for the biggest lenders. This was the first such cut since 2008 and was likely promoted by the weakness coming from Europe.
Adding to the upside in markets, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. These central banks have agreed to lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements by 50 basis points so that the new rate will be the U.S. dollar overnight index swap rate plus 50 basis points.
"The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity," the Fed said.
The employment picture also appears to be improving.
ADP's National Employment survey showed that employment in the nonfarm private business sector rose 206,000 from October to November. Economists were expecting a November reading of just 130,000.
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