GLOBAL MARKETS-Stocks, commodities fall after China rate hike

* China raises interest rates for first time since 2007

* World stocks, commodities fall; dollar extends gains

By Dominic Lau

LONDON, Oct 19 (BestGrowthStock) – World stocks, commodity prices
and the Australian dollar fell on Tuesday after China raised its
interest rates for the first time since 2007 to keep a rein on
its booming economy.

The People’s Bank of China said it would raise its benchmark
one-year lending and deposit rate by 25 basis points effective
from Oct. 20.

World stocks measured by MSCI All-Country World Index
(.MIWD00000PUS: ) fell 0.4 percent and the Thomson Reuters global
equity index (.TRXFLDGLPU: ) dropped 0.9 percent, while the MSCI
emerging market benchmark (.MSCIEF: ) slipped 0.6 percent.

The dollar index (Read more about the global trade. ) (.DXY: ), which tracks the U.S. currency
against a basket of currencies, rose 0.8 percent after hitting
the day’s high of 77.592.

“The PBOC move follows a clear need by the Chinese
authorities to take out some of the heat from the economy.
Whether this move will lead to a broader move on its currency is
open to debate,” said Simon Derrick, head of currency research
at Bank of New York Mellon.

“It certainly leads to speculation that the U.S. and China
are in some sort of a deal which will perhaps see the U.S.
taking a more gradualist approach to quantitative easing. The
dollar has already moved higher after this news.”

The greenback was earlier supported by comments from U.S.
Treasury Secretary Timothy Geithner in favour of a strong
dollar.

The Australian dollar (AUD=D4: ), seen as a proxy of China’s
economic growth because of the country’s commodity exports to
China, fell to the day’s low of $0.9805 from $0.9880.

Futures on the tech-heavy U.S. Nasdaq Composite index (NDc1: )
extended losses, down 1.3 percent to indicate a weaker opening,
after Apple (AAPL.O: ) reported weaker-than-expected gross margins
and iPad shipments disappointed investors.

Futures for the S&P 500 (SPc1: ) and the Dow Jones (DJc1: ) fell
0.2 and 0.6 percent, respectively.

Bank of America (BAC.N: ), the largest U.S. bank by assets,
said its third quarter net loss quadrupled from a year ago, as
the bank recorded a previously announced $10.4 billion goodwill
charge for its card business.

In Europe, the FTSEurofirst 300 (.FTEU3: ) index eased 0.1
percent after trading in positive territory before Chinese rates
announcement.

As China is a major consumer of commodities, the reaction
was broadly bearish. Copper prices (MCU3: ) lost 1.6 percent and
gold (XAU=: ) fell 1 percent, while oil prices (CLc1: ) dropped 1.6
percent to trade below $82 a barrel.
Commodity prices and emerging market assets have been buoyed
by expectations of another round of money-printing by the U.S.
Federal Reserve to stimulate a flagging recovery as investors
searched for higher yields, while the dollar has come under
pressure against other currencies.

Emerging market shares have gained more than 12 percent this
year, outpacing a 6-percent rise in global equities.

The market is looking for further clues on the size of the
quantitative easing, and will scrutinise any comments from Fed
Chairman Ben Bernanke and other U.S. central bank officials
later in the day.

(Additional reporting by London Markets Team)

GLOBAL MARKETS-Stocks, commodities fall after China rate hike