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Today’s News
Asian markets took a bad tumble today after China delivered a much smaller cut to lending rates than markets had originally anticipated, resulting in the continuation of Beijing’s run of disappointing stimulus steps. China’s central bank trimmed its one-year lending rate by 10 basis points and left its five-year rate unmoved, a surprise to analysts who had expected cuts of 15 basis points to both.
In addition to the meager rate cut, Chinese blue chips (.CSI300) reportedly eased by 0.3%, while the Australian dollar took a dip as a liquid proxy for China risk. Investors have been hoping for a repeat of the massive fiscal spending that had boosted the economy in the past, but Beijing seems reluctant to resort to such measures.
MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) slipped by 0.3% to a new low for the year, adding to the existing 3.9% plunge that occurred in the previous week.
Japan’s Nikkei (.N225) was still up 0.3%, though that followed after a 3.2% dip in the previous week.
EUROSTOXX 50 futures and FTSE futures were near flat. S&P 500 futures were 0.1% firmer, while Nasdaq futures added 0.2%. Earnings from AI-darling Nvidia (NVDA.O) on Wednesday will be a major test of valuations.
Analysts are currently concerned that the markets would be vulnerable to a deeper pullback in the coming days.
Other related news include:
Will China Be Forced To ‘Go Big’?
The People’s Bank of China may have to throw caution to the wind and ‘go big’ if it intends to soothe the nervousness and concerns that is currently sweeping through the financial markets.
The Chinese central bank’s policy decision is one of three in Asia for investors to take in this week, with the Bank of Korea and Bank Indonesia both expected to keep interest rates on hold on Thursday.
Five-Year Lending Benchmark Remains Unchanged
Although China’s cut on its one-year benchmark lending rate was expected, authorities seek to ramp up efforts to stimulate credit demand. However, it surprised markets by keeping its five-year rate completely unchanged.
The recovery in the world’s second-largest economy has faltered due to a worsening property slump, weak consumer spending and tumbling credit growth, which warranted further policy stimulus.
Dollar Gets The Jump Against Yuan
The dollar gained on another firm foot today, following five straight weeks of gains, as investors looked ahead to the Federal Reserve’s Jackson Hole symposium for a guide on where rates might settle when the dust of the hiking cycle clears.
The dollar made a gain of 0.7% on the euro last week as it inched ahead on the yen and surged by more than 1% on the Antipodean currencies as U.S. Treasury yields leapt in anticipation of interest rates staying higher for much longer.
