Investors Heartened by Hopes of Lower Interest Rates while Disregarding Enhanced Likelihood of a Trump Victory and the Direr Middle Eastern Situation – Currency Thoughts
Investors Heartened by Hopes of Lower Interest Rates while Disregarding Enhanced Likelihood of a Trump Victory and the Direr Middle Eastern Situation
September 24, 2024
Latest U.S. opinion polls show revived support for former President Trump especially among key swing states.
Odds of a multi-dimensional war in the Middle East have risen. This also favors Trump winning back the White House.
Dovish monetary policy signals in China, Japan, and Australia reveal a broadening influence of the Fed’s reprioritization on other central banks.
Stock markets this Tuesday closed up 4.2% in China, 4.1% in Hong Kong, 1.1% in South Korea and 0.6% in Japan. Share prices so far are up 0.3-0.6% in Germany, France, Italy and Great Britain, and U.S. Nasdaq, SPX and DOW futures are marginally in the black.
Overnight net dollar movements were limited to +0.2% against the yen and -0.2% versus the euro, sterling, loonie, and Australian and New Zealand dollars. The greenback also gained 0.1% against the Swissie.
Oil jumped 2.5% in prices as fighting escalated in the Mideast.
The 10-year U.S. Treasury yield climbed five basis points, and the British Gilt is six bps higher. Comparable French, Spanish and German sovereign debt yields are up 2 basis points.
Bitcoin appreciated 0.3%, while gold edged 0.1% lower.
The Chinese People’s Bank of China plans to cut reserve requirements by a half percentage point at an as-yet unspecified time prior to the end of 2024.
Governor Ueda of the Bank of Japan revealed a lack of urgency as that bank mulls its next policy move, saying that there is time to consider the impact of the two hikes already done before acting again.
After a scheduled policy review at the Reserve Bank of Australia that resulted in no change to the 4.35% Official Cash Rate, a statement was released that touched bases heard before such as the possibility that its next rate change could be either an increase or a decline and the assertion that core inflation is still too high. A return to in-target 2-3% inflation has been pushed out to 2026 from late 2025. On the other hand, the text now notes that “there is a risk that this pickup [in personal consumption] is slower than expected, resulting in continued subdued output growth and a sharper deterioration in the labour market.” The statement also notes “some central banks have eased policy,” suggesting that uncertain further developments in that regard also could influence the RBA. In remarks afterward, Governor Bullock dropped the unexpected comment that there had been no consideration of a rate hike at this latest policy review.
Back from yesterday’s holiday in Japan, that economy’s preliminary September purchasing manager surveys finally got published. The composite index slipped below August’s 15-month high to a 2-month low. The manufacturing index (also at a 2-month low) was below the neutral 50 level for a third straight time, while services edge up a bit.
Germany’s business climate “came under ever-increasing pressure,” according to the September IFO Institute report, dropping 1.2 index points to an eight-month low this month of 85.4. Such had been at 89.6 as recently as May. Current conditions slumped to a 50-month low, and expectations fell to a 7-month low.
Producer price inflation slowed in August to a 5-month low of 1.6% in South Korea and to a 15-month low of -2.3% in Finland.
Business confidence bounced above August’s 20-month low in Turkey to a 2-month high in September of 98.8.
In the Czech Republic, business confidence rose to a 3-month high this month, while consumer confidence climbed to a 2-month high.
In Brazil, consumer confidence clocked in at a one-year high in September.
Measures of U.S. house price inflation get released very shortly.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: BOJ Governor Ueda, Germany IFO business climate index, Japan purchasing managers survey, PBoC, Reserve Bank of Australia
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