China's interest rate cut offers little relief for stocks

Tuesday saw a majority of Asian markets fall, carrying over losses from earlier in the week as ongoing worries about the United States' high interest rates and slowing economic growth more than offset a larger-than-expected reduction in China's benchmark lending rate.

Following a relatively lackluster week-long Lunar New Year vacation, Chinese markets saw a small decline, and a larger-than-expected reduction in the five-year loan prime rate did nothing to boost investor confidence.

Mortgage rates are determined by the People's Bank of China, which reduced its 5-year LPR by a larger-than-expected 25 basis points to 3.95%, pushing the rate even closer to record lows.

However, the action simply indicated more financial assistance for the Chinese economy and coincided with investor demands for Beijing to implement more focused fiscal policies.

Through 2023, Chinese equities were the poorest performing in all of Asia. Amidst ongoing worries over a sluggish Chinese economic recovery, there was no respite in 2024.

Losses in technology companies put pressure on many markets as South Korea's KOSPI dropped 1.1% and Japan's Nikkei 225 shed 0.1%, retreating further from 34-year highs.

Recent stock market advances, especially in the United States, were mostly driven by technology as traders poured money into the field due to the hype around artificial intelligence. But this week's crucial test for the AI-driven rise will come from NVIDIA's fourth-quarter earnings, which are fundamental to an AI-driven valuation bubble.

Concerns regarding higher-for-longer U.S. interest rates continued to shake most Asian markets, particularly in the wake of last week's strong inflation data. Additionally, many Federal Reserve representatives hinted that the bank was leaning towards maintaining higher rates in the foreseeable future.

(Sources: investing.com, reuters.com)