Global News, August 25

  1. Bloomberg News
  2. Global News, August 25

CNN Money

– China stocks crash again but global markets recover. The benchmark Shanghai Composite declined 7.6%, while the smaller Shenzhen Composite shed 7.2%. The Shanghai index has now crashed 42% from its June 12 peak.

The People’s Bank of China cut its key lending rate and lowered the amount of cash large banks must keep in reserves, a move that should boost activity by allowing banks to lend more money.

Economists were expecting Beijing to act to try and prop up stocks. The central bank injected 150 billion yuan ($23.4 billion) into the financial system on Tuesday, but that was modest compared with intervention efforts seen in June and July.

– China acts to boost economy after stocks crash. The People’s Bank of China cut its key lending and deposit rates by 0.25% on Tuesday. The one-year lending rate is now 4.6% and the deposit rate is 1.75% (…) The central bank acknowledged the weakness in the Chinese economy – and the need for intervention.

China has already taken several steps to control the crisis. The government gave money to brokerages to buy stocks — and ordered company executives not to sell their shares. New company listings were suspended.

U.S. futures signal big rebound on Wall Street. Officials in China, whose stock market woes have riled world markets, stepped up after the close of the market to cut interest rates and allow banks to lend more.

Markets in Europe and U.S. stock futures were already higher before China’s move, and the stimulus added to the rebound from one of the worst trading days in years on Monday. U.S. stock futures were up more than 4% and markets in Germany and the U.K. climbed.

Foreign automakers are bracing themselves for declining sales as China’s economy slumps. Foreign automakers are bracing themselves for declining sales as China’s economy slumps. BMW (BAMXF), Volkswagen (VLKAF), and Peugeot (PEUGF) have all reported slowing sales in recent earnings reports, and Ford (F) singled out the Chinese economy as a major risk.

Sales of passenger cars fell nearly 7% in July to their lowest level in 17 months, while production tumbled nearly 12%, according to the China Association of Automobile Manufacturers.

Weak sales reflected the slowdown in economic growth, according to Barclays auto analysts, and there’s little sign of improvement in the short term.

Bloomberg News

China stocks plunge, PBOC cuts rates. Chinese markets sold off again, with the Shanghai Composite Index crashing 7.6 percent, dropping below 3,000 for the first time in eight months. According to people familiar with the situation, Chinese authorities have halted intervention in the stock market this week amid debate over the cost-effectiveness of supporting equity prices. This, however, did not stop the PBOC from cutting interest rates and reserve ratios in an effort to support the economy.

– Europe stocks recover. The continuing crash in China did not spread beyond its borders today, with many other Asian markets rising as Chinese equities fell. European stocks have been staging a strong recovery following their worst day since 2008 on Monday, with the U.K.’s FTSE 100 gaining 2.6 percent and Germany’s DAX Index up over 3.1 percent.

More German good news. A breakdown of German second-quarter GDP released this morning showed that exports continue to lead growth in that economy. Business confidence unexpectedly rose as companies seemed to brush off concerns of a China slowdown. The Ifo institute’s business climate index beat expectations of a fall by climbing to 108.3 from 108 in July.

M&A deals. RSA Insurance Group Plc rose in London this morning after Zurich Insurance Group AG made a conditional offer to buy the company for 550 pence a share. Monsanto, meanwhile, have increased their takeover offer for Syngenta AG following the Swiss agro-chemical producers’ rejection of an earlier approach.