China keeps lending rates unchanged

Asia-Pacific markets were mixed on Monday as China kept its loan prime rates unchanged, as expected. The Nikkei 225 hit a near 34-year high.

By Ahmed Azzam | @3zzamous | 22 January 2024

Market open
  • Nikkei 225 hits a 34-year high, showcasing robust performance.

  • China maintains record-low LPR rates.

  • Oil prices dip to $73 as Libya's Sharara field resumes production.

  • Eyes on US GDP as economists expect a 2% gain in the fourth quarter.

The Nikkei 225 surged to a fresh 34-year high, contrasting with China's ongoing stock slump. US and European futures saw gains, while Treasuries made modest advances and Brent oil prices fell.

China maintains record low LPR rates

The People's Bank of China opted to keep key lending rates at record lows during January's fixing, reinforcing efforts to support the nation's economic revival. The 1-year loan prime rate (LPR) held steady at 3.45%, marking the 5th consecutive month, while the 5-year rate remained at 4.2% for the 7th month. This decision followed last week's unexpected move to maintain the medium-term lending rate, coupled with increased liquidity injections.

Oil slips to $73 as Libya's Sharara field resumes production

On Monday, oil prices eased to around $73 per barrel as Libya's largest oil field, Al-Sharara, resumed production after a three-week hiatus triggered by political protests. Libya's National Oil Corp lifted force majeure, allowing the field to produce up to 300,000 barrels per day. Despite this, investor caution persists over potential supply disruptions in the Middle East amid ongoing Red Sea tensions. The US official acknowledged that military action may take time to deter assaults in the region. Both the International Energy Agency (IEA) and OPEC foresee robust global oil demand growth in 2024, underpinned by strong fundamentals.

Focus on US GDP amidst signs of moderation

As the week unfolds, attention turns to the US economy's fourth-quarter performance. While growth likely moderated, economists anticipate a sustained annualized gain of 2%, following the robust 4.9% recorded in the prior period. This signals a resilient and steady trajectory, maintaining the strongest six-month stretch since 2021.