China stocks fall on IPO wave
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. Britain's FTSE 100 rose 0.8 percent to 7,041.25. U.S. stocks were poised to open lower, with Dow and broader S&P futures edging down 0.2 percent.
The Shanghai Composite Index in mainland China had its worst day in months, losing 4.1 percent to close at 4,298.71, in turn dragging down Hong Kong's Hang Seng 1.3 percent to 27,755.54. Australia's S&P/ASX 200 briefly surged after the rate cut announcement but ended practically unchanged at 5,826.50 on indications the central bank probably won't cut rates further. Benchmarks in Taiwan and Singapore fell while New Zealand's rose. Markets in Japan, South Korea and Thailand were shut for holidays.
Investor sentiment was hit by worries about further market cooling measures as well as fears that a fresh wave of initial public offerings would siphon away funds from existing shares. More than 20 companies are scheduled to go public on Chinese markets starting from Tuesday until the beginning of next week, raising hundreds of millions of dollars in the process.
The Reserve Bank of Australia cut interest rates by a quarter percentage point at its board meeting, as many economists had expected. That brings the central bank's policy interest rate to an all-time low of 2 percent, providing additional monetary support for stocks and other financial assets. Australia's economy is struggling as growth slows in China, its major market for iron ore and other commodity exports.
Investor enthusiasm waned after the rate cut because language in the central bank's statement was a bit more upbeat than expected, signaling that this will probably be the final dollop of stimulus, IG Markets strategist Stan Shamu wrote in a commentary. "In a nutshell, it gave no hint of further easing and sounded like it is done with this easing cycle," he said.
Benchmark U.S. crude fell 8 cents to $58.85 in electronic trading on the New York Mercantile Exchange. The contract fell 22 cents to close at $58.93 a barrel on Monday. Brent crude rose 34 cents to $66.79 a barrel in London.
The dollar strengthened to 120.28 yen from 120.11 yen on Monday, though trading volumes were light with trading in Tokyo closed. The euro fell to $1.1085 from $1.1147.