The stock market in London joined a notable rally across Europe on Monday, spurred by significant monetary policy adjustments in China, despite a relatively quiet day for economic news elsewhere. The blue-chip FTSE 100 index closed with a gain of 0.53%, reflecting investor optimism. In a surprise move, China's central bank has lowered the one-year and over-five-year loan prime rates to 3.35% and 3.85%, respectively.
This adjustment comes as part of China's ongoing efforts to stimulate the economy, which is recognized as the second-largest in the world. Analysts had anticipated that the one-year rate would remain at 3.45% while the over-five-year rate would hold at 3.95%. Furthermore, the People's Bank of China has also reduced the seven-day reverse repo rate by 10 basis points, bringing it down to 1.7%.
This move has been interpreted as a response to the existing economic challenges and a proactive strategy to offer more liquidity in the market. An analyst from ING remarked, "The PBOC held back from monetary easing in recent months primarily to preserve currency stability against the backdrop of a strong dollar.
The dovish stance taken by the US recently, along with a slight weakening of the dollar over the past month, may have opened a window of opportunity for the PBOC to implement these rate cuts." On the political front, US President Joe Biden concluded his reelection campaign over the weekend and has officially endorsed Vice President Kamala Harris as his successor.
If confirmed as the nominee from the Democratic Party, Harris is poised to campaign against the Republican Party’s nominee, Donald Trump, a former president. In corporate updates, the UK's Office of Communications has imposed a significant fine of 17.5 million pounds sterling on BT Group due to the company’s inability to adequately prepare for network disruptions.
This includes an incident from June 2023 that resulted in 14,000 emergency calls being affected. As a result, BT Group’s shares saw a slight decline of 0.35% at the close of trading. In another significant corporate development, Vodafone Group divested an additional 10% stake in the Vantage Towers partnership for a substantial sum of 1.3 billion euros.
Following this sale, Vodafone retains a 50% stake in this joint venture, which involves a consortium of infrastructure investors led by Global Infrastructure Partners and KKR. Vodafone’s shares also saw a minor drop, declining by 0.11% at closing. These corporate maneuvers signify the ongoing transformations within the telecommunications sector in the UK and the broader European market..