We saw another relatively calm day in the markets yesterday and even though the spectre of trade tensions still looms large, the global stock markets are still trending well to the topside. We saw good gains across the globe yesterday as indices printed gains even in the Emerging Markets regions that have been suffering recently. We’ve seen a bit of stability in the currency world as well in EM’s with the Peoples Bank of China once more taking steps to calm the Yuan depreciation this time urging lenders to prevent “herd behaviour”. The Yuan did appreciate over yesterday’s session but is still sitting at vulnerable levels with a large risk event ahead today in the form of the Chinese Trade Balance data.
We did get the expected quiet RBA rate announcement and statement yesterday with the board sticking very close to its usual comments. There were some slight changes with inflation expectations edging lower and unemployment also expected to come off over the next couple of years, however these had little impact on the market and any change in rate is still not expected for at least a year and probably will be even further away. The Aussie dollar continued to trade below 0.7400 but did have a good rally late in the trading day with this being attributed more to options interest and a fatigued short market rather than any central bank influence.
We did hear a touch more on trade tensions overnight with the US advising that they will begin imposing 25% tariffs on an additional $16 bio worth of Chinese imports in two weeks’ time. The market reaction was fairly muted in terms of any downside moves but investors will be adding that to their portfolio of downside risk factors and keeping a close eye on developments on that front over the next few trading sessions.
Looking ahead to today’s trading and in Asia the focus will be on those aforementioned Chinese numbers, with investors looking for signs that US tariffs are starting to take effect. We also have Kiwi inflation expectation data due and after that are set to hear from RBA Governor Lowe as he speaks in Sydney this lunchtime. It’s fairly quiet in terms of data releases through the London session but we are due to hear from Fed Member Barkin in the New York time zone before the latest US Crude Oil inventories are released.
Also, note that the RBNZ have their latest Official Cash rate release due tomorrow morning. With no expectation of any rate change the focus will be on the Statement and later Press Conference, investors see the risk of a slightly more dovish sentiment coming through as data hasn’t been as strong recently. The Kiwi dollar is sitting just above yearly lows and could be vulnerable to a further dive if we do have a strongly Dovish hold.
