Over the weekend there were major developments in China which are set to provide an impetus to send the local market higher today.
China stimulus set to spur global markets
China's government has announced a cut to its official interest rate for the sixth time in 12 months, which brings the benchmark rate for one-year loans down to 4.35%.
Tellingly, the deposit rate was also reduced and now stands at just 1.5% which is a reminder to investors that even Chinese savers are in search of high yield opportunities too.
With economic growth in the world's second largest economy falling to a six-year low of 6.9% in the last quarter, the central bank, The People's Bank of China (PBOC), didn't stop at interest rates in its quest to kick start the slowing economy.
China also announced a reduction in the reserve requirements it would demand of the nation's banks – this marks the fourth reduction in a year – and will no doubt have some economists wondering if prudential standards are being relaxed too much.
In response to China's stimulus measures global markets rallied – the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is set to get its turn today…
Stocks to watch
If investors are turning bullish on the outlook for global equities then there are a handful of ASX-listed stocks which are prime candidates to benefit.
Global fund managers Magellan Financial Group Ltd (ASX: MFG) gained 3.6% on Friday and Platinum Asset Management Limited (ASX: PTM) jumped a significant 6.2% on Friday. These two stocks could see that share price momentum continue as they both stand to benefit from further gains in international equity markets.
Macquarie Group Ltd (ASX: MQG) added 1.5% on Friday and could also benefit from an uptick in global stock market activity given both its range of business activities including funds management, investment banking and trading.
But beware
While markets will no doubt rejoice and cheer further stimulus, investors need to remind themselves that the underlying cause of any rally (rather ironically) is weak economic data. Given the billions of dollars that have been thrown at economies around the world to prop them up since the global financial crisis (GFC) investors would be well advised to question whether the latest moves from China are really a panacea or just another delaying tactic.
