As Expected, The RBNZ Cut The Rate By 0.5%

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 At the end of Tuesday, the Dow Jones Index (US30) added 0.28%. The S&P 500 Index (US500) was up 0.57%. The Nasdaq Technology Index (US100) increased by 0.57%.Federal Reserve officials expressed optimism that inflation is falling and the labor market remains robust, supporting the possibility of further interest rate cuts, albeit at a moderate pace, minutes from the November 6–7 meeting showed. Officials noted that monetary policy decisions depend on economic trends and cautioned against premature rate cuts. The volatility of recent data and uncertainty about the impact of a neutral interest rate on economic activity make the policymaking process particularly challenging. Markets rate the odds of a 25 bps rate cut at the December 17–18 FOMC meeting at 67%.Intel (INTC) shares are down more than 3% after Bloomberg reported that Qualcomm’s interest in acquiring Intel has waned. General Motors (GM) stock is down more than 8%, and Ford Motor (F) is down more than 2% after President-elect Trump promised to impose additional 10% tariffs on goods from China and 25% tariffs on all products from Mexico and Canada. Both automakers import cars from China into the US and have plants in Canada and Mexico.The Mexican peso fell more than 2% to above 20.7 per US dollar on Tuesday, the weakest since March 2022, after Donald Trump doubled down on his threats to raise tariffs. In his Truth social media posts, Trump said he would impose 25% tariffs on imports from Mexico and Canada. Mexico is the US’s largest trading partner, and the auto sector would be one of the hardest hit. In response, Mexican President Claudia Sheinbaum suggested that Mexico could respond by imposing its own tariffs. The peso has weakened about 20% this year.Equity markets in Europe were declining yesterday. Germany’s DAX (DE40) fell by 0.56%, France’s CAC 40 (FR40) closed down 0.87%, Spain’s IBEX 35 (ES35) lost 0.80%, and the UK’s FTSE 100 (UK100) closed down 0.40%.WTI crude oil prices held below $69 per barrel on Wednesday as traders weighed signs of another OPEC+ production delay and easing geopolitical risks following a ceasefire between Israel and Hezbollah. Markets are anticipating the December 1 OPEC+ meeting. It is reported that the group will postpone its planned January production increase by several months due to signs of oversupply. Meanwhile, tensions in the Middle East eased after Israel and Hezbollah reached a 60-day ceasefire agreement in US-brokered talks. However, shortly after President Biden’s announcement, both sides resumed attacks, underscoring the difficulty in reaching a long-term agreement.The US natural gas (XNG) prices rose to $3.48/MMBtu, the highest level in more than a year, as estimates of colder weather and lower production prompted utilities to accelerate the start of the season for drawing gas from storage. EIA data showed that gas inventories in storage fell by 3 billion cubic feet in the week ending November 15 instead of the expected 5 billion cubic feet. It was the first accelerated decline this season, as relatively low prices in the previous week prompted producers to cut production.Asian markets traded flat on Tuesday. Japan’s Nikkei 225 (JP225) fell 0.87%, China’s FTSE China A50 (CHA50) gained 0.28%, Hong Kong’s Hang Seng (HK50) rose 0.04%, and Australia’s ASX 200 (AU200) was negative 0.69%.The Reserve Bank of New Zealand cut the discount rate by 50bps to 4.25%, which is in line with market expectations. The RBNZ said the rate cut strikes a balance between supporting growth and employment while keeping inflation under control and ensuring market stability. This is the third rate cut by the Central Bank this year, bringing the total easing to 125bps this cycle. In addition, Governor Adrian Orr has suggested that another significant interest rate cut will occur early next year if economic conditions develop as expected. In the external market, the kiwi remains under pressure from recent tariff threats by US President-elect Donald Trump, particularly those targeting China, New Zealand’s largest trading partner.In Australia, the annual CPI reading came in at 2.1%, which is in line with the growth seen in September but below analysts’ estimate of 2.3%. This is the lowest inflation rate since July 2021. The Reserve Bank of Australia (RBA) believes that monetary policy should remain restrictive until there is confidence that inflation is moving steadily towards target.

News feed for: 2024.11.27

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