US stock futures soar after China's surprise rate cut

U.S. stocks were setting up for a sharply higher open on Friday, taking their lead from gains in European and Asian markets and the first rate cut by China's central bank in more than two years. Read More China surprises with rate cut to spur growth The People's Bank of China cut its benchmark interest rates Friday for the first time in more than two years on Friday to lower borrowing costs and lift a cooling economy back on track.

Aren't efficient markets supposed to price in everything? How can there be a positive surprise nearly every day for years and years?

All known information. Plenty of unknowns out there. For instance, nobody knew, ahead of time, that Apple's Iphone would be such a huge success. And nobody knew that Motorola, the creator of the first commercial cell phone, would eventually not only become an also-ran in the cell phone business - it would be bought up by a Chinese company.

And in this case, nobody knew that the Chinese would cut interest rates. The view was that China was leery of continuing to inflate its real estate bubble. It appears the government is equally leery of an economic slowdown that could trigger political unrest.

For decades, corruption has helped lubricate Chinese business deals by granting exceptions to businesses that pay up to bypass the labyrinthine regulations imposed by government bureaucrats with overly-high opinions of their ability, skills and knowledge. That workaround has been quashed by Xi Jinping's relentless crackdown on corruption. The full weight of Chinese bureaucracy has been brought on both domestic and foreign businesses. Assuming Xi continues his crackdown without actually reducing the regulatory burden on businesses in China, he will need a lot more than interest rate cuts to keep China's economic growth going.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.