China slashes rates as global economic data remain gloomy

It's China's turn to get aggressive on the monetary policy front. AFP/CNA reports:

China's central bank announced on Wednesday a steep cut in its interest rates -- by four times the usual margin -- in a signal that it would pull out all the stops to boost weakening economic growth.

The benchmark one-year lending and deposit rates will both be reduced on Thursday by 108 basis points, compared with the usual 27 basis points in Chinese rate cuts, the People's Bank of China said...

It was China's fourth interest rate cut since mid-September, and the deepest rate cut since October 1997...

After the rate cut, one-year lending rates in China will be 5.58 per cent, while one-year deposit rates will drop as low as 2.52 per cent...

The central bank also announced cuts in the amount of money banks must keep in reserve.

Beginning from December 5, large banks will see their required reserve ratio drop by one percentage point, while it will go down by two percentage points for smaller financial institutions.

The monetary stimulus will probably be needed as the economies of China's top export markets are looking dreadful. From Bloomberg:

Americans cut spending by 1 percent in October, the biggest drop since the last recession in 2001...

Adjusted for inflation, spending fell 0.5 percent, a fifth consecutive decrease...

The U.S. spending report showed incomes rose 0.3 percent after a 0.1 percent gain in September, and measures of inflation decelerated. The price gauge tied to purchases fell 0.6 percent in October and was up 3.2 percent from the same month in 2007. Stripping out fuel and energy, prices were unchanged on the month and up 2.1 percent from a year before...

In the U.S., the Reuters/University of Michigan final index of consumer sentiment dropped to 55.3 in November, the lowest level since 1980...

U.S. orders for durable goods, which are meant to last several years, slid 6.2 percent last month after a 0.2 percent drop in September, the Commerce Department reported...

Excluding demand for transportation equipment, which tends to be volatile, orders dropped 4.4 percent, also more than anticipated and the biggest decline since January 2002...

Bookings for non-defense capital goods excluding aircraft, a measure of future business investment, decreased 4 percent, the biggest decline in almost two years. Shipments of those items, used in calculating gross domestic product, fell 2.4 percent following a 1.6 percent gain in September...

The number of Americans filing first-time claims for unemployment benefits fell to 529,000 last week, while remaining close to the highest level since 1992, Labor Department figures showed. The four-week moving average for claims reached a 26- year high...

Purchases of new houses dropped 5.3 percent to an annual pace of 433,000, lower than forecast and the fewest since January 1991, the Commerce Department said today in Washington. The median sales price decreased to a four-year low.

Europe is not looking any better.

The inflation rate in Germany, Europe’s largest economy, slowed more than forecast this month to 1.5 percent, the Federal Statistics Office said...

In Britain, government figures showed consumer spending fell 0.2 percent and fixed investment dropped by 2.4 percent in the third quarter from the previous three months. Europe’s second-largest economy suffered a 0.5 percent contraction in the period, the first decline in 16 years...

Italian business confidence fell to the lowest in more than 15 years in November amid a recession in Europe’s fourth-biggest economy.