Why are ASX 200 shares rebounding on Friday?

China’s COVID-zero policies have slowed its economic growth and impacted its trading partners.

Illustration of men and women pushing share price graph up

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • ASX 200 shares stage end of the week rally 
  • China eased pandemic related travel restrictions 
  • The Middle Kingdom also cut its benchmark mortgage lending rate by more than expectations 

S&P/ASX 200 Index (ASX: XJO) shares are staging a welcome rebound today.

After falling 1.5% yesterday, the benchmark index is up 1.1% in afternoon trading.

This comes despite further, more modest falls in US markets yesterday (overnight Aussie time), which saw the S&P 500 slip another 0.6%. US markets have come under renewed pressure amid fears of rising interest rates and a potential recession in the world’s top economy.

So, why are ASX 200 shares shaking off the malaise to put in such a strong day?

ASX 200 shares welcome COVID restriction news out of China

Part of the answer looks to lie with the world’s number two economy and Australia’s top trading partner, China.

The Middle Kingdom may be offering tailwinds to ASX 200 shares on two separate fronts.

First, China announced that it will scale back some of its economy crippling COVID-19 restrictions. While China appears intent on pursuing its zero-virus policies, the nation is scaling back testing requirements for people flying in from the US and other select nations.

This may be the first move towards reopening the country and could see an uptick in China’s economic growth.

What else did China report?

Other news out of China that could be helping push ASX 200 shares higher today is a larger than expected 0.15% reduction in its benchmark reference rate for mortgages.

That’s the second cut this year, taking the reference rate down to 4.45%.

Chinese officials said they’re ready to take additional steps to help spur economic growth.

Commenting on the move, Capital Economics’ Julian Evans-Pritchard said (quoted by Reuters), “Today’s reduction to the five-year Loan Prime Rate should help drive a revival in housing sales, which have gone from bad to worse recently.”

Evans-Pritchard cautioned that “the lack of any reduction to the one-year LPR suggests that the PBOC [People’s Bank of China] is trying to keep easing targeted and that we shouldn’t expect large-scale stimulus of the kind that we saw in 2020.”

With many ASX 200 shares doing business with China, any revival in the nation’s massive housing sector will be welcomed.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

share price high, all time record, record share price, highest, price rise, increase, up,
Share Market News

Here are the top 10 ASX shares today

Here are your top 10 biggest gainers in the ASX 200 on Friday.

Read more »

a group of five women in business attire stand side by side with unhappy looks on their faces and holding their thumbs down.
Share Market News

5 worst ASX All Ordinaries shares in June

Negative sentiment towards these five ASX shares resulted in big price declines in June. Here's why.

Read more »

blue arrows representing a rising share price ASX 200
Share Market News

Here are the 3 most heavily traded ASX 200 shares on Friday

We take a look at the most traded ASX 200 shares by volume today.

Read more »

Two male ASX 200 analysts stand in an office looking at various computer screens showing share prices
Share Market News

ASX 200 midday update: Regis Resources jumps, BHP and Rio Tinto drop

The ASX 200 is having a better day on Friday...

Read more »

Woman sitting looking miserable at airport
Travel Shares

Why did the Qantas share price plunge 19% in June?

With July upon us, we look at the headwinds that battered the flying kangaroo in June and a few offsetting…

Read more »

A male ASX 200 broker wearing a blue shirt and black tie holds one hand to his chin with the other arm crossed across his body as he watches stock prices on a digital screen while deep in thought
Share Market News

5 things to watch on the ASX 200 on Friday

The ASX 200 is expected to have a better day on Friday...

Read more »

oil and gas worker checks phone on site in front of oil and gas equipment
Energy Shares

Santos shares go cold despite energy regulator outlining ‘crucial’ role gas will play for decades

The Australian Energy Market Operator has released a 30-year plan for investment to enable the transition to renewables.

Read more »

A young boy dressed in a suit and glasses that are too big for him sits at a desk and holds up a trophy representing the top 10 ASX shares today
Share Market News

Here are the top 10 ASX shares today

Here are your top 10 biggest gainers in the ASX 200 on Thursday.

Read more »