28 Aug

Australia’s inflation is falling at a slower pace than RBA expected. ECB may cut rates at the next two meetings

August 28, 2024

By JustMarkets

At Tuesday’s close, the Dow Jones (US30) Index was up 0.02%, while the S&P 500 (US500) Index was up 0.16%. The NASDAQ Technology Index (US100) closed positive 0.16%.

The Fed will almost certainly cut rates on September 18, which Powell signaled in Jackson Hole and which other officials have since effectively confirmed. The only questions now are whether the easing cycle will start at 25- or 50-basis points and how much policy easing will occur in the coming months. At Jackson Hole, Powell made essentially two turns. The first, as expected, was his clear signal of an imminent rate cut. The second, perhaps less expected, was his equally clear emphasis that unemployment, not inflation, is now the number one determinant of upcoming policy decisions.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE40) rose by 0.35%, France’s CAC 40 (FR40) closed down 0.32%, Spain’s IBEX 35 (ES35) added 0.55%, and the UK’s FTSE 100 (UK100) gained 0.21%. Germany’s DAX Index held early gains and closed 0.3% higher at 18,682 on Tuesday, resuming its strong momentum and recovering from a slight dip in the previous session. This was despite the GfK Consumer Confidence Index unexpectedly falling to its lowest level since May, underscoring the weak sentiment in the German economy after yesterday’s poor Ifo results.

The European Central Bank may gradually cut interest rates if inflation continues to fall, but more data is needed to decide on a September cut, Dutch policymaker Klaas Knot said Tuesday. With just two weeks to go until the ECB’s next meeting, a growing number of policymakers favor another rate cut in September, and many say the real debate is over whether another cut in October should follow the move.

Libya has announced a complete shutdown of its oil fields amid political conflict and ongoing regional tensions. The cessation of production and exports from Libya, one of the largest oil producers, has heightened fears of tightening global supply. Potentially, this could provide fuel for higher oil prices. WTI crude prices rose to $76 a barrel on Wednesday after losing more than 2% in the previous session, led by a decline in US oil inventories. API data showed a 3.4 million barrel decline in inventories for the week ended August 23, beating market expectations for a 3.0 million barrel decline.

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Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) added 0.47%, China’s FTSE China A50 (CHA50) was down 0.03%, Hong Kong’s Hang Seng (HK50) was up 0.43%, and Australia’s ASX 200 (AU200) was negative 0.16%.

The Australian dollar climbed above $0.68, hitting its highest level this year, as better-than-expected inflation data for the month reinforced hawkish sentiment towards the Reserve Bank of Australia’s (RBA) monetary policy. The data showed Australia’s monthly Consumer Price Index came in at 3.5% for the year, slowing from June’s 3.8% rise but above estimates of 3.4%. Minutes from the RBA’s last meeting showed that policymakers considered raising interest rates to curb inflation but ultimately decided to stay on hold. RBA head Michele Bullock also recently said that despite signs of weakening inflation, it was “premature” to consider cutting rates.

S&P 500 (US500) 5,625.80 +8.96 (+0.16%)

Dow Jones (US30) 41,250.50 +9.98 (+0.024%)

DAX (DE40) 18,681.81 +64.79 (+0.35%)

FTSE 100 (UK100) 8,345.46 +17.68 (+0.21%)

USD Index 100.76 +0.20 (+0.20%)

Important events today:
  • – Australia Consumer Price Index (m/m) at 04:30 (GMT+3);
  • – German GfK German Consumer Climate (m/m) at 09:00 (GMT+3);
  • – US Crude Oil Reserves (w/w) at 17:30 (GMT+3).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.


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