Year-end profit-taking was the dominant theme in holiday-thinned stock markets as China’s decision to raise interest rates last Saturday injected a note of caution into a rally that has taken US and Eur-opean equities to levels not seen since the collapse of Lehman Brothers in 2008.
The People’s Bank of China raised its one-year lending and deposit rates by 25 basis points to to 5.81 per cent and 2.75 per cent respectively, the second rise in just over two months, in a bid to rein in inflation.
“The latest rate hike was not a major surprise, though some reluctance to hike has been visible in recent statements and the announcement of macroeconomic targets for 2011 appeared to be biased more towards supporting growth rather than containing inflation,” Flemming Nielsen, senior analyst at Danske Bank, said.