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Pre-Market Primer: China to the Rescue, All Eyes on Bernanke


China's central bank lowered interest rates to stimulate the economy. Will Ben Bernanke follow suit today?

MINYANVILLE ORIGINAL Markets are rallying as China's central bank adopted more stimulative policies.

The People's Bank of China announced that it will cut benchmark lending and deposit rates by 25 basis points. The one-year yuan lending rate is now 6.31% and the deposit rate fell to 3.25%. Banks will also be allowed to offer loans at a 20% discount to the benchmark rate The central bank raised interest rates three times in 2011 and twice in 2010 to try to prevent a housing bubble from getting out of hand. Today was the first cut in interest rates in China since 2008.

Yesterday morning, European Central Bank President Mario Draghi dashed hopes that the ECB will initiate another round of dirt-cheap LTRO lending and kept interest rates steady at 1%. Today, all eyes will be on Ben Bernanke's testimony before Congress at 10:00 a.m. EDT. Yesterday, Dennis Lockhart of the Atlanta Fed suggested that a second bout of Operation Twist might be in order.

Initial jobless claims fell to 377,000 last week from an upwardly revised 389,000 in the prior week, beating expectations.

China's monetary policy move and the positive news for the US job market sent markets rallying higher. European and Asian markets rose this morning, and US index futures are pointing to a positive opening. Dow (^DJI) futures gained 0.51% to 12,482.00. S&P 500 (SPY) futures rose 0.75% to 1,325.40 and Nasdaq (^IXIC) futures rose 0.65% to 2,566.50.

Oil futures also moved into the green on demand expectations in China. WTI futures are up 1.71% at $86.47/barrel.

France's unemployment rate rose by 2 basis points to 9.6% today, according to the International Labor Organization. Despite this and the country's loss of its AAA rating in January, the bond market still sees French debt as a safe bet. France sold 7 billion euros of bonds at a decade-low yield of 2.47% for the benchmark 10-year bond. Spain, meanwhile, saw yields rise again with 10-year yields rising to 6.04% at an auction today.

Apple (AAPL) said that it will include Baidu's (BIDU) search engine on iPhones in China, sending shares of the Chinese company up 4%.

Twitter: @vincent_trivett
No positions in stocks mentioned.
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