China stocks fall, Oz flat after rate cut

AP and AFP

HONG KONG–Chinese stocks plunged Tuesday as the start of an IPO wave cooled investor sentiment and Australian shares were flat after the central bank cut interest rates to a record low to stimulate the limping economy. Other global benchmarks were mixed with two major Asian markets closed.

European stocks opened higher. France’s CAC-40 added 0.6 percent to 5,113.66 and Germany’s DAX gained 0.8 percent to 11,716.07. The United Kingdom’s FTSE 100 rose 0.8 percent to 7,041.25. U.S. stocks were poised to open higher, with Dow futures edging up 0.1 percent to 18,008.00. Broader S&P 500 futures crept up less than 0.1 percent to 2,110.00.

Investors reacted with caution to the news that the European Union had nudged up its growth forecast for the 19-country eurozone this year. The EU kept unchanged its forecast for 2016 and noted that the economy in Greece is predicted to take a dive this year. Greece is struggling to agree with creditors on a new plan to get bailout loans and the uncertainty is eroding confidence in its economy. Asian stocks drifted Tuesday, reversing earlier gains, with China stocks taking fright as new share issues raised the prospect of a sell-off. Hong Kong’s main index slid 1.0 percent by mid-session, tracking China stocks which fell as the new issues raised the prospect of funds being diverted from existing equities, dealers said. The benchmark Shanghai Composite Index dropped 1.84 percent at the break. ��Today and tomorrow will be the peak for the latest round of IPOs so people may be selling down their holdings from the secondary market to use the money for IPO subscription,�� Steven Leung, Hong Kong-based director of institutional sales at UOB Kay Hian, told Bloomberg News. The Shanghai Composite has recorded an astonishing 118-percent gain over the past year, on expectations of further monetary easing in China. Australia’s benchmark S&P/ASX200 closed flat at 5,826.5, dropping 1.0 point or 0.02 percent, giving up earlier gains as bank stocks mostly drifted lower after the central bank cut interest rates to an historic low of 2.0 percent. Tokyo and Seoul were closed for holidays, but early trade elsewhere in Asia had been energized by Wall Street, which put in a strong performance Monday on news of the first rise in U.S. factory orders in eight months. The Australian market gyrated around the central bank’s rate decision to cut official rates to a record 2 percent from 2.25 percent, as it tries to tamp down the Aussie dollar and stoke economic growth to offset a downturn in the key mining sector.