Economy

Investing.com — U.S. President makes use of the Presidents’ Day holiday to make a surprise visit to Ukraine, four days before the anniversary of Russia’s invasion. U.S. stock markets are closed, leaving most of the rest of the world without a clear lead. Facebook parent Meta is trialing a subscription service (and making sure that you know how much Apple and Alphabet will charge you for using it). Hedge fund Galois Capital has become the latest casualty of the FTX collapse, and oil prices drift higher as UN inspectors deal a blow to hopes of Iranian oil returning to world markets. Here’s what you need to know in financial markets on Monday, 20th February.1. Biden beats Putin to KyivU.S. President Joe Biden made a surprise visit to the Ukrainian capital of Kyiv, at the start of a week that will mark the anniversary of Russia’s invasion.Biden said his visit was to “reaffirm our unwavering and unflagging commitment to Ukraine’s democracy, sovereignty, and territorial integrity.”Both sides in the conflict are currently engaged in a scramble to replace depleted stockpiles of ammunition. U.S. Secretary of State Anthony Blinken said at the weekend that China is considering supplying Russia with military aid and warned that any move to do so “would cause a serious problem for us and in our relationship.”Russian President Vladimir Putin is due to make a keynote speech that is expected to focus on the war on Tuesday.2. Meta to offer subscription services for Facebook, InstagramMeta Platforms (NASDAQ:META), the parent company of Facebook and Instagram, said at the weekend it’s launching a paid subscription service that will offer benefits such as account verification, a step that it said would protect up-and-coming content generators.The move – which will debut in Australia and New Zealand – is a reaction against increasing disillusionment with spam and other bad-faith material on Facebook in particular. It will cost $11.99 a month if subscriptions come through a web browser, but in a pointed jab at Apple (NASDAQ:AAPL) and Alphabet (NASDAQ:GOOGL), it will cost another $3 a month if ordered through Apple’s App Store or Google Play, reflecting the steep commissions that the two platform giants charge.   3. Stocks adrift during U.S. holidayAsian stocks were higher but European stocks largely drifted through a day depleted by public holidays. U.S. equities markets are closed for the Presidents’ Day holiday, while Europe is thinned out by Carnival celebrations.By 06:30 ET (11:30 GMT), the benchmark Euro Stoxx 50 index was up less than 0.1%, while the euro was down by a similar amount at $1.0687.Among the few stocks moving in Europe was Reckitt Benckiser (LON:RKT), which fell over 2% after voluntarily recalling two batches of infant formula in the U.S. “out of an abundance of caution.”4. Hedge fund Galois becomes latest FTX casualtyGalois Capital, a hedge fund run by former Kraken executive Kevin Zhou, has become the latest casualty of the FTX debacle.The fund, which was managing $200 million at the time of FTX’s collapse, still has half of those assets trapped on the exchange’s platform. According to various reports, Zhou has now decided to close the fund, returning 90% of its unencumbered assets to investors. The remaining 10% will be held back “temporarily.”The Financial Times reported that Galois has sold its claims on FTX (currently in Chapter 11 bankruptcy in the U.S.) for 16c on the dollar.5. Oil edges higher on Iran setbackCrude oil prices edged higher after reports indicated further delays to the lifting of U.S. sanctions on Iran. UN monitors detected the presence of uranium enriched to just below the level needed to make a nuclear bomb (and well in excess of the level needed to make fuel for reactors, which Iran says is the only aim of its nuclear program). The disclosures will complicate any attempt to lift the U.S. sanctions on Iranian oil exports. Elsewhere, Saudi Arabia’s Energy Minister Prince Abdulaziz insisted that the OPEC+ group of oil exporters is still flexible in its output policy, despite announcing last week that existing output quotas would be frozen for the rest of the year.By 06:50 ET, U.S. crude futures were up 0.6% at $77.03 a barrel, while Brent was up 0.6% at $83.50 a barrel. More

LONDON (Reuters) -Britain set out plans on Monday for a post-Brexit review of its rules for the 11 trillion pound ($13.2 trillion) asset management sector, with a focus on bolstering liquidity after a near meltdown in funds used by pension schemes last September.Until Britain’s departure from the European Union in 2020, rules for the UK funds sector were written in Brussels.Brexit means UK regulators can write their own regulations, but the Financial Conduct Authority (FCA) makes clear in its broad review it will stick to “strong international standards” given Britain’s global role in asset management.The sector has fallen short in dealing with stresses in recent years in Britain and elsewhere due to inadequate liquidity, prompting scrutiny globally.Property funds were suspended in the immediate aftermath of Britain’s 2016 vote to leave the EU and when the economy went into lockdown to fight COVID-19 in March 2020 as investors sought to pull out their money.So-called liability-driven investment (LDI) funds, used by pension schemes to ensure long-term payouts to pensioners, struggled to meet cash calls last September when UK government bond prices tumbled.”The regulatory framework contains rules around liquidity management. Many of these rules are designed to protect consumers,” the FCA said in a discussion paper on reforming the sector.”But the growth of the fund industry means that liquidity management in funds is also relevant to the good functioning of markets,” the discussion paper out for public consultation said.It also considers how rules could be adapted for tokenised or digitised units in funds, meaning assets under management split into fractions to make it more affordable for small investors.”With no cemented new proposals put forward, the next three months should give the industry the time to fly a kite on some Brexit dividend proposals,” Kevin Doran, managing director of AJ Bell Investments, said.Although Britain has left the EU, many of the money market funds, LDI funds and mutual funds offered in the UK are listed in EU centres such as Dublin and Luxembourg, even if managed in London.The FCA said it wants to see fund managers complying with liquidity stress testing guidelines issued by the EU’s securities watchdog ESMA, which will be converted into UK rules.A public consulation is open until May, after which the FCA will focus on priority areas for changes.($1 = 0.8310 pounds) More

US president Joe Biden has made a surprise visit to Kyiv in a dramatic show of American commitment to Ukraine ahead of the first anniversary of Russia’s invasion.The stopover, which comes ahead of Biden’s pre-announced trip this week to Poland’s capital, Warsaw, was shrouded in secrecy because of security concerns. The visit to the Ukrainian capital by Biden comes as China’s top diplomat landed in Moscow for talks on a possible peace settlement to end the year-long war, according to local media reports.Russia’s Kommersant newspaper reported earlier today that Wang Yi had arrived in the Russian capital. Wang said over the weekend that China would soon publish a peace proposal based on principles laid out by China’s president Xi Jinping, including territorial integrity and “the sovereignty of all countries”.On the eve of Biden’s visit to Warsaw, Polish president Andrzej Duda called on Nato powers to give post-war security guarantees to Ukraine. He told the Financial Times that promises of security guarantees “would be important” for Ukraine and the morale of its soldiers by underscoring “this feeling that Nato stands with them”. “I thought it was critical that there not be any doubt, none whatsoever, about US support for Ukraine in the war,” Biden said during joint remarks with Ukrainian president Volodymyr Zelenskyy.“I’m here to show our unwavering support for the nation’s independence, sovereignty and territorial integrity.”Biden will make a stout defence of the US’s involvement in the war in a key speech tomorrow in Warsaw to mark the anniversary of Russia’s full-blown invasion of Ukraine.The flurry of diplomatic activity today follows a warning by US secretary of state Antony Blinken at the Munich Security Conference on Saturday that China was preparing to provide lethal arms and ammunition to Russia to help it execute its campaign in Ukraine. Blinken warned such a move would have “serious consequences” for the US-China relationship.Speaking at the same conference in Munich, however, Wang defended China’s relationship with Russia and said the US would never dictate ties between the two countries. FT subscriber event: To mark the first anniversary of Russia’s full-blown invasion of Ukraine, the FT will be holding an exclusive webinar for subscribers to discuss the future of the war, with FT correspondents and special guests. Register for free.Five more stories in the news1. Meta to launch subscription service For up to $14.99 a month, Facebook and Instagram users can get a verification badge, direct access to customer support and extra impersonation protection, Meta chief Mark Zuckerberg announced yesterday. Called Meta Verified, the new service will be rolled out first in Australia and New Zealand this week.2. Hedge fund shuts down after half its assets trapped on FTX Galois Capital, which last year managed about $200mn in assets and was one of the biggest crypto-focused quantitative funds, told investors that it had halted all trading and unwound all its positions as it was no longer viable, according to documents seen by the FT.3. Sunak hopes to seal N Ireland deal soon The UK prime minister is pressing to seal a deal with the EU on post-Brexit Northern Ireland trade rules as early as tomorrow, rejecting calls from Boris Johnson to take a more confrontational approach. Rishi Sunak’s officials held talks with their Brussels counterparts yesterday on how to give Northern Ireland politicians a say in the application of EU law.4. World Bank members split on reforms Developing nations have warned against reforms at the World Bank that would imperil its triple-A credit rating and increase funding costs after Trump appointee David Malpass’s early departure. Shareholders and economists have argued the bank could provide more climate finance by expanding its balance sheet and taking on more risk.5. South Korea’s ruling party leader hints at need for nuclear weapons Chung Jin-suk, the leader of South Korea’s ruling People Power party, has warned that the country may have to “seriously consider” developing its own nuclear weapons as a deterrent to its northern neighbour. North Korea today fired two short-range ballistic missiles, following the launch on Saturday of what Pyongyang claimed was a Hwasong-15 intercontinental ballistic missile, which experts believe is capable of striking the mainland US.The day aheadPresident’s day Today is a federal holiday in the US to mark George Washington’s birthday. Equity and bond markets as well as government buildings will be closed.EU meeting The EU’s foreign ministers will meet in Brussels to discuss the war in Ukraine. Israel legal reform The Knesset will hold the first reading of a contentious bill that aims to curb the powers of the judiciary.What else we’re reading America’s struggle to contain the deadly drug Fentanyl American parents are mourning the deaths of their children amid an unprecedented drugs crisis, which claimed 107,000 lives in the year to August 2022. About two-thirds of those deaths were caused by fentanyl, a synthetic opioid that is 50 times more potent than heroin and used to treat severe cancer pain. But it is increasingly being cut into illegal street drugs via a well-honed supply chain built by Chinese and Mexican crime syndicates.

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Goldman chief prepares to explain himself Earlier this month, David Solomon admitted to mistakes that resulted in deep job cuts at Goldman Sachs. He now prepares to face shareholders at the bank’s second investor day at its headquarters in Manhattan. Solomon will try to reassure them that a painful fall in profits in the fourth quarter does not mean Goldman is moving in the wrong direction.Missing Chinese dealmaker casts chill across tech sector The disappearance of Bao Fan, founder of investment bank China Renaissance, has set on edge the country’s vast tech industry that the dealmaker helped build. Bao’s fate is a pivotal test of Beijing’s stance on the sector — a two-year crackdown has already sidelined Alibaba chief Jack Ma, decimated the vast for-profit education industry and hit investments globally.China’s ChatGPT catch-up: Tech giants such as Baidu and Alibaba are racing to match the west’s recent developments in artificial intelligence.Early bidders pitch competing visions for Manchester United Sir Jim Ratcliffe, the billionaire founder of UK chemicals group Ineos, and Sheikh Jassim bin Hamad Al Thani, the son of Qatar’s former prime minister, have launched their bids for one of the world’s most valuable sporting teams.CEO whisperers: who does the boss turn to in their hour of need? Some leaders use trusted insiders, others rely on “professional critics” to tell them uncomfortable truths. Oliver Balch spoke to a range of chief executives to hear their stories. “CEOs often lack candid challenge . . . and instead end up in a little echo chamber, which is when companies are in danger of getting things horribly wrong,” said one CEO.Take a break from the newsFrom the Atlas Mountains to off-grid in the deep south-west, here are five reasons to retreat to Morocco this spring.

Views of the peaks at Olinto Atlas Mountain Retreat © Ebony Siovhan More

Here’s a look at the week ahead in markets from Kevin Buckland in Tokyo, Naomi Rovnick and Karin Strohecker in London, Vidya Ranganathan in Singapore and Lewis Krauskopf in New York. 1/A YEAR OF WARU.S. President Joe Biden made an unannounced visit to Kyiv on Monday in a show of support ahead of the one-year anniversary of Russia’s invasion, promising President Volodymyr Zelenskiy that Washington would stand with Ukraine as long as it takes.His visit follows a meeting of senior politicians and military leaders from around the globe in Germany over the weekend for a gathering dominated by Europe’s biggest conflict since World War Two – as well as Sino-U.S. tensions. The war is estimated to have cost thousands of lives and displaced millions. Sweeping sanctions have severed Russia from the fabric of global financial markets, reshaped commodity and energy flows, and pushed up inflation and funding pressures globally. Moscow is ramping up its spring offensive, while Ukraine – armed with heavier and longer-range firepower from the West – gathers strength for a counter push. Graphic: Ukraine budget financing https://www.reuters.com/graphics/UKRAINE-CRISIS/ANNIVERSARY-FUNDING/myvmokznkvr/Ukraine-finance.jpg 2/DEBT AND DIPLOMACYDifficult international discussions over debt forgiveness for poor nations are going to get even trickier, when India hosts from Feb. 22-25 the first G20 finance and central bank chiefs meeting for the year. The world’s largest bilateral creditor China is under fire for playing tough on its terms. At the top of the agenda, besides cryptocurrency regulation, is the G20 Common Framework debt pact to allow the restructuring of low-income countries’ debts after the pandemic. India supports a push by the IMF, the World Bank and the United States for the Common Framework to include middle-income countries, though China has resisted. Progress is slow and while Chad, Ethiopia, Ghana and Zambia have all sought help, so far only Chad has reached a deal. Graphic: Distress signals https://www.reuters.com/graphics/GLOBAL-MARKET/THEMES/gkplwdonlvb/chart.png 3/WAITING ON UEDAAlthough incoming Bank of Japan governor Kazuo Ueda is a dove, investors expect his tenure to end to yield curve controls. The $8-trillion question for the JGB market, though, is when?On the same day as the Ukraine anniversary – Feb. 24 – Ueda should offer clues on timing when he testifies with his two would-be deputies to the lower house. His Upper house testimony will be on the following Monday. The consensus is Ueda will not rush to make changes, but with the costs of maintaining YCC climbing, and market distortions ever more pronounced, time is against him.Elsewhere, the Reserve Bank of New Zealand sets policy on Wednesday and the Bank of Korea on Thursday. Both are seen taking dovish turns, with consumer prices starting to cool, and South Korea at risk of its first recession since the 2020 onset of the pandemic. Graphic: Will Ueda end yield curve control? https://www.reuters.com/graphics/JAPAN-ECONOMY/BOJ/gdpzqdengvw/chart.png 4/BUY, BUY, BUYFourth-quarter earnings season is nearly over and it has been tepid so far. The days ahead will bring a look at how the U.S. consumer has held up as some heavy-hitter retailers report results.Walmart (NYSE:WMT), the world’s largest retailer by sales, and home improvement giant Home Depot (NYSE:HD) report on Tuesday, while discount store operator TJX Companies (NYSE:TJX) reports on Wednesday. Lowe’s (NYSE:LOW) and Best Buy will deliver results the following week.Beyond the retail sector, semiconductor maker Nvidia (NASDAQ:NVDA) and pharma company Moderna (NASDAQ:MRNA) also announce earnings. Fourth-quarter earnings are expected to have dropped 2.8% from the year-ago period, Refinitiv IBES data as of Feb 10 shows. Graphic: U.S. retail stocks versus the market https://www.reuters.com/graphics/GLOBAL-MARKET/THEMES/gkvlwdnxlpb/chart.png 5/THE BUSINESS OF INFLATIONEuropean stocks have risen in line with a recovery in business sentiment and activity that signals the region may escape recession. But markets are treading a fine line.Any upswing in the new orders component of the upcoming purchasing managers indexes – the keenly watched surveys of business activity – could be bullish. But if rosier commercial conditions bring with them rising price pressures, this may strengthen the European Central Bank’s resolve to keep raising interest rates given stubbornly high inflation. Yields on Germany’s two-year bonds, which reflect interest-rate expectations, have hit their highest since 2008 this month.At the same time, equities are plugged into a view that higher borrowing costs will not derail companies’ earnings prospects. These outlooks are not coherent. It will be difficult for both asset classes to be right. Graphic: Global business activity https://www.reuters.com/graphics/GLOBAL-ECONOMY/PMI/klvygdwxevg/chart.png More

PARIS (Reuters) – French Finance Minister Bruno Le Maire said on Monday he will meet retailers this week to find ways to help shoppers cope with high food price inflation, with a view to finding a solution to the problem by March 15.”I will hold talks with French retailers this week… March 15 will be the deadline,” Le Maire told BFM TV.”There is no reason to see for mid-March a flight upwards in food prices. Let’s stop playing with the fears of the French people,” he added.Asked if the solution under consideration was for retailers to agree to sell an anti-inflation basket of everyday essential goods at knockdown prices, Le Maire said: “It will be the solution they find the most efficient.”The government initially said it wanted big retail chains such as Carrefour (EPA:CARR), Casino and the family-owned grocery dynasties Auchan and E. Leclerc, to sell a basket of about 50 everyday items at purchasing price from next month.However, only smaller chains such as discounter Lidl and Systeme U have so far agreed to the government idea. The bigger retailers such as Carrefour say they have already taken action by blocking prices on a set number of goods.The INSEE official statistics agency forecast last week that food price inflation would remain at 13% through the first half of the year.Le Maire reiterated on Monday he expected inflation to ease from the middle of the year and for France to have positive economic growth in 2023, with ‘even more positive growth’ in 2024. More

Developing nations have warned against reshaping the World Bank in the aftermath of David Malpass’s departure as its head in a way that would imperil the institution’s ultra-high credit rating.The early exit of Trump-appointed Malpass, announced last week, is expected to hasten reforms — pushed by US Treasury secretary Janet Yellen — under his yet-to-be chosen successor that are designed to more effectively help poorer countries mitigate and plan for climate change. Malpass said he would leave his role at the bank early, by June 30, and the US, the largest shareholder, is racing to draw up a list of potential successors. The bank’s board will soon announce a timeline for member states to propose candidates.Shareholders and economists have argued that the bank could provide more climate finance by expanding its balance sheet and taking on more risk. But developing countries have warned against doing anything that would jeopardise the bank’s triple-A rating and thereby increase its funding costs. The G11 group of developing nations recently distributed a note — seen by the Financial Times — in which they argued that it was important to “avoid measures . . . that might not be understood by rating agencies in positive light”.The World Bank’s high rating was “necessary to be able to raise funds at a cost that would enable lending at below-market rates”, it said. “This is the very rationale underlying the [multilateral development bank] concept.” The note was signed by countries including Brazil, Argentina, Chile and Peru in South America, as well as by Pakistan, Iran, Bahrain, the United Arab Emirates, Qatar, India, Indonesia, Singapore, Vietnam, China, Saudi Arabia and Russia, plus Egypt and more than two dozen African nations.The World Bank has traditionally emphasised the importance of holding a triple-A designation from all three big credit rating agencies, allowing its borrowers to benefit from the institution being able to access low-cost funding from bond markets.But a review commissioned by the G20 last year said the world’s multilateral development banks, which include the World Bank, could boost their lending capacity by “several hundreds of billions of dollars over the medium term”, via reforms such as redefining their approach to risk, while preserving their current credit ratings. The World Bank’s main lending arm, the International Bank for Reconstruction and Development, approved about $33bn in loans in the financial year ending June 2022. Multilateral development banks “manage themselves to a level of risk appetite that can effectively be even lower than that represented by a triple-A rating”, the review said, meaning they could take on more risk without being downgraded.

Changes to World Bank rules would need to be approved by its shareholders, with the US controlling the most votes.There were “differences” between shareholders about “whether or not you need to keep [the triple-A rating]”, said one government representative.“We don’t want to put at risk the triple-A rating of the bank,” said a senior government official from Germany’s development co-operation ministry, adding that the lender should instead “be smarter” about how existing funds were used.Chris Humphrey, a member of the G20 review panel and senior research associate at think-tank ODI, said the concerns were understandable but the proposed changes would not endanger the triple-A rating. “These are incredibly solid institutions.” One development finance expert close to the discussions said it was “hard to know where the red line” was that, if crossed, would mean the bank would be downgraded, adding that following a downgrade it could be “hard to cross back”.The debate is likely to spill into the upcoming meetings of the IMF and World Bank in April.The US Treasury is assembling a shortlist of potential Malpass successors that is expected to include: Samantha Power, head of the US Agency for International Development; Rockefeller Foundation president and former USAID boss Rajiv Shah; and World Trade Organization director-general Ngozi Okonjo-Iweala.Rating agency S&P said last year that it could lower the bank’s rating “if management — contrary to our expectations — adopts more aggressive financial policies”. Additional reporting by Jonathan Wheatley in London More

WELLINGTON (Reuters) – Expected damage to New Zealand’s economy from severe weather over the past three weeks has prompted financial markets to downgrade the outlook for interest rate rises.An initial disaster, flash flooding in Auckland, New Zealand’s largest city, hit on Jan. 27. Then on Feb. 12 to 15 a cyclone hit the North Island, which includes Auckland.”As the scale of the devastation has been gradually revealed, the market has all but priced out the chance of the RBNZ going ahead with the 75bp hike it signalled last November,” said ANZ chief economist Sharon Zollner in a note, referring to the Reserve Bank of New Zealand (RBNZ).”Indeed, it’s now pricing a small chance of a pause or just a 25bp hike next week, which is fair,” she added.The flash flooding damaged roads across Auckland, closed businesses including the airport, destroyed houses, roads and crops. The cyclone then damaged still more roads, many of which are still closed, swept away rail track and grounded flights. Homes are flooded and communities cut off.Tanker trucks cannot collect milk, some logging is suspended, and meat processing is reduced. When Cyclone Gabrielle hit, picking had just begun on pip-fruit farms, whose production is worth about NZ$1 billion a year. Now the industry has lost not only 2023 product but many orchards are still inaccessible.Among 25 economists polled by Reuters on Feb. 13-16, 20 expected the central bank to raise its policy rate by 50 basis points next week, even though the RBNZ Monetary Policy Statement in November had suggested a 75 basis point rise this month and an eventual peak of 5.5%.The median from the Reuters poll now puts the peak at 5.25%.No one has yet estimated the scale of the damage from the severe weather. But Finance Minister Grant Robertson told broadcaster TVNZ the cost to the government could be similar to the NZ$13.5 billion ($8.42 billion) it had spent rebuilding Christchurch after an earthquake in 2011.”This will be a significant event financially for the government and for individuals, households, businesses, banks and insurers,” he said.Fifteen people are so far confirmed to have died in the two disasters.A surge in prices looks likely from the disruption. Economists expect inflation, already running at a near three-decade high of 7.2%, to rise as the country replaces homes and contents and repairs infrastructure. Loss of crops will push up food prices.That would normally be a reason for a central bank to lift interest rates further, but some economists expect the RBNZ to look past the sudden rise as being temporary. Still, Kiwibank chief economist Jarrod Kerr said the central bank should pause hikes until the effect of the cyclone can be understood.”Current circumstances warrant caution. But what we think they should do is not what they will likely do,” said Kerr.After the Christchurch earthquake, the central bank cut its policy rate due to concerns about the economy.($1 = 1.6090 New Zealand dollars) More

SHANGHAI (Reuters) – China kept its benchmark lending rates unchanged for a sixth straight month in February, as expected, with the world’s second-largest economy showing more signs of recovery from a pandemic-induced slump.A clutch of better-than-expected data recently suggests economic activity is rebounding as Beijing exited from its stringent zero-COVID strategy in December and shifted to a pro-growth policy stance.The one-year loan prime rate (LPR) was kept at 3.65%, while the five-year LPR was unchanged at 4.30%.”We expect the PBOC to stay accommodative in the first half of this year, but only through liquidity-related actions, not rate cuts,” analysts at Barclays (LON:BARC) said in a note.”Unlike the U.S. and EU, China remains the outlier on monetary policy, with still benign inflation and recovering but still weak activity creating room for the PBOC to remain accommodative in the first half.”In a poll of 27 market watchers, 21, or 78% of all participants, predicted no change to either rate.New bank loans in China jumped more than expected to a record 4.9 trillion yuan in January as the central bank looks to kick-start recovery while new home prices rose for the first time in a year, as Beijing stepped up support for the property sector that accounts for a quarter of the domestic economy.Market participants also said the LPR decision was within expectations, as the People’s Bank of China (PBOC) ramped up medium-term liquidity injections, rolling over maturing policy loans last week while keeping the interest rate unchanged.The medium-term lending facility (MLF) rate serves as a guide to the LPR and markets mostly use the medium-term rate as a precursor to any changes to the lending benchmarks.In spite of recovering momentum, some analysts expect rates will ease after China’s annual parliamentary gathering in March, when the government announces key growth targets for the year.”We think the PBOC may cut the MLF rate and banks will subsequently reduce the LPRs as early as March following the annual session of the National People’s Congress which is scheduled to begin on March 5,” said Tommy Wu, senior economist at Commerzbank (ETR:CBKG). “Macro policy stimulus will likely be announced during the annual session, and it will be a good timing for the PBOC to cut rates and signal that it stands ready to support the economic recovery.”Tommy Xie, head of Greater China research at OCBC Bank, agreed rates would likely be cut in the coming months.”Easing monetary policy is likely to work hand in hand with the expansionary fiscal policy in the face of weak domestic demand. A lower interest rate will help minimise the cost of the issuance of government bonds,” Xie said, adding that lower mortgage rate could also help defuse systemic risk.The LPR, which banks normally charge their best clients, is set by 18 designated commercial banks who submit proposed rates to the central bank every month.Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages. China last cut both rates in August to boost the economy. More