US stocks decline after China cuts bank reserve ratio

Washington, March 1 (IANS) US stocks ended lower on Monday after volatile trading, as China’s central bank announced a cut in its reserve requirement ratio (RRR) for commercial banks by 0.5 percentage points.

The Dow Jones Industrial Average fell 123.47 points, or 0.74 percent, to 16,516.50. The S&P 500 lost 15.82 points, or 0.81 percent, to 1,932.23. The Nasdaq Composite Index was down 32.52 points, or 0.71 percent, to 4,557.95, Xinhua reported.

The move of the People’s Bank of China (PBOC), the first of its kind this year, aims to “ensure reasonably ample liquidity in the financial system; guide a stable and appropriate growth in credit; and create a favourable financial environment for supply-side structural reform,” said China’s central bank Monday in a statement.

Chinese shares ended sharply lower on Monday before the PBOC’s announcement. The benchmark Shanghai Composite Index plunged 2.86 percent to close at 2,687.98 points.

In Europe, German benchmark DAX index at Frankfurt Stock Exchange inched down 0.19 percent, while French benchmark index CAC 40 rose 0.90 percent. The CBOE Volatility Index, often referred to as Wall Street’s fear gauge, rose 3.74 percent to end at 20.55.

In other markets, oil prices saw a rise after the PBOC announced to lower its reserve requirement ratio to support the economy.

The US dollar decreased against most major peers as the housing data from the country came out negative.

In late New York trading, the euro dropped to 1.0883 dollars from 1.0928 dollars in the previous session, while the dollar bought 112.83 Japanese yen, lower than 113.91 yen of the previous session.

Gold futures on the COMEX division of the New York Mercantile Exchange rose on Monday as the G20 meeting ended with no tangible plan for growth, giving support to the precious metal.

Chinese yuan strengthens

 The central parity rate of the Chinese currency renminbi, or the yuan, strengthened 67 basis points to 6.5385 against the US dollar on Tuesday, according to the China Foreign Exchange Trading System.

In China’s spot foreign exchange market, the yuan is allowed to rise or fall by two percent from the central parity rate each trading day, Xinhua reported.

The central parity rate of the yuan against the US dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.

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