US futures turn positive

News from China prompted a late turnaround in the morning for US futures, as the People’s Bank of China changed its policy on lending rates.

US futures and European markets received an unexpected fillip in the form of a change in Chinese monetary policy. The People’s Bank of China announced that it had removed the floor on lending rates, allowing banks to compete more directly.

The floor had been put in place to prevent a ‘race to the bottom’ on lending rates, which would have been detrimental to bank profits. The removal means that unfettered capitalism (in lending rates at least) can now operate, with businesses able to obtain more competitive rates. This will lead to a boost in consumption and investment, as companies borrow to expand.

This has also helped to liven up an otherwise boring morning, where a lack of corporate and economic data meant that European shares failed to move outside a narrow trading range. The dominant element last night was weak tech earnings from Google and Microsoft, which added to a poor week for tech companies generally.

With no US data out this afternoon, the focus will be on earnings, with General Electric, Honeywell and Schlumberger all out. GE’s profits were up 1% to $3.13 billion.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.