COLUMN-Greece a sideshow to China’s main game for commodities – by Clyde Russell (Reuters U.K. – June 29, 2015)

http://uk.reuters.com/

LAUNCESTON, Australia, June 29 (Reuters) – With the focus on whether Greece will or won’t default on its debts or even stay within the euro zone, the important news of China easing its monetary policy again has been largely sidelined.

As fascinating as the Greek machinations are, ultimately they will have little impact on commodity markets, other than the potential to boost some safe-haven demand for gold and possibly other commodities, such as agriculture, which have little correlation to equities and bonds.

The real news is that the world’s largest commodity producer, consumer and importer appears to be taking more determined steps to boost its flagging growth rate.

China’s central bank cut lending rates for the fourth time since November, while also trimming the amount of cash that certain banks have to hold as reserves.

In a possible sign as to how serious the authorities are in getting money to flow faster through the economy, this was the first time since the global financial crisis in 2008 that both interest rates and the reserve ratio were cut at the same time.

There has been some suggestion that the motivation for the June 27 policy action was to boost the flagging stockmarket, which has slumped around 20 percent in the past two weeks.

But it would seem more likely that the long-term aim is to lower borrowing costs and get businesses to boost credit uptake, with any support to the stockmarket falling into the category of a welcome short-term side effect.

The other point that needs to be considered is the likelihood of further easing, given real interest rates remain relatively high, especially given the slowing state of economic growth.

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