24/09/2024 Evening Reports
Traders are increasingly confident the European Central Bank (ECB) will cut interest rates next month due to signs of a weakening economy. Market expectations for a quarter-point rate reduction in October have risen to 55%, driven by declining euro-area private-sector output and German business confidence. While the ECB has already lowered rates twice this year, there’s growing speculation it may accelerate cuts to support the faltering economy. Economists from Goldman Sachs and others suggest further easing could be imminent, with markets pricing in 120 basis points of cuts over the next year.
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Global Currency Movements: Yuan Soars on Stimulus, RBA Maintains Hawkish Stance
China’s yuan reached a 16-month high on Tuesday after new stimulus measures from Beijing, including a planned 50 basis point cut to banks’ reserve requirements and potential easing in lending rates. These moves, along with property market support, boosted optimism for growth, lifting China-sensitive assets such as stocks, commodities, and the euro. The People’s Bank of China’s actions followed the U.S. Federal Reserve’s recent 50 basis point rate cut, which has provided room for other central banks to consider easing measures.
Meanwhile, the Reserve Bank of Australia held interest rates steady but maintained a hawkish tone, stressing its commitment to controlling inflation. The Australian dollar hit its highest level in 2024 before slightly retreating. The Japanese yen eased against the dollar as the Bank of Japan signaled a cautious approach to further tightening. The euro and sterling both rose, with the latter reaching a 2.5-year peak, buoyed by the Bank of England’s more measured stance on rate cuts.
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Global Stocks and US Futures Climb as China’s Stimulus Measures Boost Risk Appetite; Commodities Rally
European stocks and US equity futures advanced after China introduced a broad stimulus package to support economic growth. The Stoxx Europe 600 Index rose 0.7%, with gains led by sectors tied to China, such as mining and luxury goods.
Brent crude exceeded $75 a barrel, and iron ore prices surged, benefiting shares of Rio Tinto and BHP.US futures also pointed to a strong Wall Street open, while Treasuries declined. China’s measures, including lower bank reserve requirements and 800 billion yuan in liquidity, lifted market sentiment.
However, analysts cautioned that the stimulus might take time to impact Europe’s slowing economy. Meanwhile, oil prices were buoyed by Middle East tensions, and gold reached a record high. Investors now await key US economic data and Federal Reserve signals on further rate cuts.
