Thursday 1st August: Asian stocks fall after Fed rate cut

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Global Markets:

  • Asian Stock Markets : Nikkei up 0.09%, Shanghai Composite down 0.71%, Hang Seng down 0.90%, ASX down 0.35%
  • Commodities: Gold at $1407.90 (-1.28%), Silver at $16.09 (-1.90%), Brent Oil at $64.33 (-1.11%), WTI Oil at $57.81 (-1.31%)
  • Rates : US 10-year yield at 2.051, UK 10-year yield at 0.604, Germany 10-year yield at -0.423

News & Data:

  • (CNY) Manufacturing PMI 49.7 vs 49.6 expected
  • (CNY) Non-Manufacturing PMI 53.7 vs 54 expected
  • (NZD) ANZ Business Confidence -44.3 vs -38.1 previous
  • (AUD) CPI q/q 0.60% vs 0.50% expected
  • (AUD) Trimmed Mean CPI q/q 0.40% vs 0.40% expected
  • (AUD) Private Sector Credit m/m 0.10% vs 0.30% expected
  • (JPY) Consumer Confidence 37.8 vs 38.5 expected
  • (JPY) Housing Starts y/y 0.30% vs -2.20% expected
  • (EUR) German Retail Sales m/m 3.50% vs 0.50% expected
  • (GBP) Nationwide HPI m/m 0.30% vs 0.20% expected
  • (EUR) French Prelim CPI m/m -0.20% vs -0.30% expected
  • (EUR) Spanish Flash GDP q/q 0.50% vs 0.60% expected
  • (EUR) German Unemployment Change 1K vs 2K expected
  • (EUR) Italian Monthly Unemployment Rate 9.70% vs 10.00% expected
  • (EUR) CPI Flash Estimate y/y 1.10% vs 1.00% expected
  • (EUR) Core CPI Flash Estimate y/y 0.90% vs 1.00% expected
  • (EUR) Italian Prelim CPI m/m 0.10% vs 0.10% expected
  • (EUR) Prelim Flash GDP q/q 0.20% vs 0.20% expected
  • (EUR) Unemployment Rate 7.50% vs 7.50% expected
  • (EUR) German 10-y Bond Auction -0.41|2.0 vs -0.26|1.2 previous
  • (EUR) Italian Prelim GDP q/q 0.00% vs -0.10% expected
  • (USD) ADP Non-Farm Employment Change 156K vs 150K expected
  • (CAD) GDP m/m 0.20% vs 0.10% expected
  • (CAD) RMPI m/m -5.90% vs -2.90% expected
  • (CAD) IPPI m/m -1.40% vs -0.20% expected
  • (USD) Employment Cost Index q/q 0.60% vs 0.70% expected
  • (USD) Chicago PMI 44.4 vs 51.7 expected
  • (USD) Crude Oil Inventories -8.5M vs -2.5M expected
  • (USD) Federal Funds Rate <2.25% vs <2.25% expected
  • (AUD) AIG Manufacturing Index 51.3 vs 49.4 previous
  • (JPY) Final Manufacturing PMI 49.4 vs 49.6 expected
  • (AUD) Import Prices q/q 0.90% vs 1.80% expected
  • (CNY) Caixin Manufacturing PMI 49.9 vs 49.6 expected
  • (JPY) 10-y Bond Auction -0.15|3.8 vs -0.14|3.9 previous

Markets Update:

Asian shares fell to six-week lows on Thursday while the dollar jumped to two-year highs as the U.S. Federal Reserve cut rates by 25 basis points, a first since December 2008 during the global financial crisis, when the Fed slashed its rate to a record low near zero.

Powell characterized the rate cut as “a mid-cycle adjustment to policy”, citing signs of a global slowdown, simmering U.S. trade tensions and a desire to boost too-low inflation. Markets took that as a sign that sharp further cuts were not imminent. The United States and China on Wednesday ended a brief round of trade talks without much progress in ending their year-long tariff war. Downbeat data and factory surveys on Thursday pointed to further weakness for Asia’s trade-reliant economies.

The Japan’s Nikkei reversed early losses and was mostly unchanged, while Australian shares declined 0.35%. Losses in Chinese shares accelerated after it opened lower with the Shanghai Composite down 0.7% amidst Fed rate cuts and end of trade talks. Chinese shares were also affected by Chinese factory activity contracting in July. Hong Kong’s Hang Seng pulled back by 0.9%.

Yields on U.S. Treasuries rose as investors scaled back expectations for at least 100 basis points of easing in the near term and climbed as high as 2.051%. The dollar enjoyed a broad-based rally against major currencies, including the euro and Antipodean currencies on expectations monetary policies in Europe, Australia and New Zealand will remain accommodative. Oil prices fell on Thursday in Asia despite a bigger-than-expected fall in U.S. crude inventories. Brent oil fell 1% to $64.33 per barrel in the wake of Powell’s comments on the rate outlook. Spot gold made a new two-week trough on Thursday after falling to 1,407.90 after the U.S. Federal Reserve cut rates as expected but hinted that further easing might not follow.

Upcoming Events:

  • 09:30 AM GMT – (GBP) Manufacturing PMI
  • 12:00 PM GMT – (GBP) BOE Inflation Report
  • 12:00 PM GMT – (GBP) MPC Official Bank Rate Votes
  • 12:00 PM GMT – (GBP) Monetary Policy Summary
  • 12:00 PM GMT – (GBP) Official Bank Rate
  • 12:00 PM GMT – (GBP) Asset Purchase Facility
  • 12:00 PM GMT – (GBP) MPC Asset Purchase Facility Votes
  • 12:30 PM GMT – (GBP) BOE Gov Carney Speaks
  • 03:00 PM GMT – (USD) ISM Manufacturing PMI
  • &more…


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