Chinese stock rose, with a key index hitting a three-year high, while bond yields fell on Monday, as markets cheered a surprise rate cut that investors hope may signal the start of a fresh cycle of aggressive policies to boost flagging growth.
The People’s Bank of China bank cut one-year benchmark lending rates by 40 basis points to 5.6 percent late of Friday, taking by surprise market participants who had predicted more covert policy easing measures such as liquidity injections.
The first rate cut in more than two years reflects a change of course for Beijing and the central bank, which had persisted with modest stimulus measures before finally deciding last week that a bold monetary policy step was required to stabilise the world’s second-largest economy.
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