Early trading this week is likely to see a reaction to the decision of the People´s Central Bank of China to cut interest rates. The announcement was made over the weekend, and represents the second drop in rates in three months. With the pace of economic growth slowing, a housing bubble that appears to have burst and general fears about deflation taking hold, the move to cut the one year lending rate by 0.25% to 5.35% will be seen as further evidence of concern about the trajectory of the economy.
Chinese markets rallied on the back of the announcement earlier today, with the Hang Seng and Shanghai composite indexes each rising by 0.7%, but it remains to be seen how traders in Europe and the US will react once the day gets under way.
Also of note today will be the release of Markit Manufacturing PMI´s across Europe. The index is expected to inch up slightly to 51.1 having recorded gains for four consecutive months. In Spain, forecasts predict a slight drop in the Index, a figure of 54.66 coming in just under January´s Reading of 54.7.