China took the lead on an otherwise thin day on the economic calendar. They announced another interest rate hike, China’s third since October last year, to rein in pricing pressures in their red-hot economy.
The move is most likey to weigh on commodity, basic materials, and other emerging-market-centric companies today. With the Egyptian story moving away from the headlines, oil prices may pull back some more today in the wake of China’s move.
The rate hike is evidence of China’s determination to control inflation without hurting the economy’s growth prospects. Other major emerging markets — such as India, Brazil, Indonesia and South Korea — are similarly in a tightening mode. But instead of getting concerned about the tightening cycle, the market should look at it as evidence of secular global growth drivers.
Today’s earnings reports were mixed, with a number of large industry players issuing results. Sara Lee and NYSE Euronext missed expectations. Arcelor-Mittal, the largest steelmaker in the world, and Toyota Motors, the largest automaker in the world, reported better-than-expected results and provided favorable outlook. Disney reports after the close today.
Sheraz Mian
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