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European shares slide on 'powerful cocktail' of China slump, Treasuries and Italy

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The PBOC said it will cut for most lenders the amount of cash set aside as reserves from Oct. 15

The People's Bank of China announced earlier yesterday that it would lower the required reserve ratio by 1 percent for most banks on October 15, allowing lenders to pay off CNY450 million (USD65 million) in medium-term lending facilities due to mature that day and freeing up another CNY750 million in liquidity.

The RRR cut would not create depreciation pressure on the yuan, the PBOC said, adding that the central bank would keep the foreign exchange markets stable. China has repeatedly said it will not resort to massive stimulus.

The rally in PetroChina's shares comes at a time when a rebound in China's stocks is much needed. The nation's equity market had already lost US$2.4 trillion in value since January before Monday, amid signs that deleveraging and a trade spat with the United States is hurting economic growth.

On Monday the State Council, China's cabinet, said it will increase export tax rebates from November 1 and will speed up export tax rebate payments in a new bid to boost the real economy and support trade growth.

The views in the newspaper, which is run by the ruling Communist Party's official People's Daily, do not necessarily reflect Chinese government policy.

"China sectors such as energy, IT and industrials will be most impacted based on our analysis, while sectors such as real estate, insurance, diversified financials, telecom and utilities generate virtually no revenue from the United States", a team led by Pedro Martins said in a note.

Reserve requirement ratios (RRRs) - now 15.5 per cent for large institutions and 13.5 per cent for smaller banks - would be cut by 100 basis points effective Oct 15, the PBOC said.

The decision is meant to "further encourage the stable development of the real economy, optimise the liquidity structure of commercial banks and financial markets, lower financing costs, and to continue increasing the financial systems' efforts to support small businesses, private enterprise and innovation", the People's Bank of China said in a statement.

"The trade war's impact on the economy is showing".

Chinese stocks fell in their biggest one-day drop since February after markets re-opened following a week-long holiday in China, with the Shanghai-Shenzhen CSI 300 index down more than 4 percent for only the second time in more than 2-1/2 years.

The "timely" RRR cut is big enough to help boost confidence in the economy, said Mr Xu Hongcai, deputy chief economist at the China Centre for International Economic Exchanges, a Beijing think-tank. Yields of China's 10-year central government bonds have been trending lower this year, standing at 3.633 per cent on Monday.

Small firms with no export licenses can also bundle their products with trading firms that have permits. According to the official press release, the cut will release a total of CNY1.2 trillion into the banking system. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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