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Wednesday Morning Coffee - Markets Update - 10 July 2024 - APAC Shares Edged Higher; Kiwi Dips Following RBNZ’s Less Hawkish Tone

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Markets Update: Asian stocks mostly rose on Wednesday as hopes for U.S. rate cuts boosted regional markets, while the New Zealand dollar fell after the RBNZ's hawkish stance on inflation compared to its previous policy meeting, leading to expectations of RBNZ rate cuts later this year.

 

Economic Calendar

 

Global Markets Roundup: 10 July 2024


Asian-Pacific (APAC) stocks remained near two-year highs on Wednesday, driven by growing optimism about imminent U.S. interest rate cuts. Conversely, the New Zealand dollar declined after the Reserve Bank of New Zealand (RBNZ) signaled increased confidence in controlling inflation.


MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose 0.09%, staying close to the over two-year high reached earlier this week. Japan's Nikkei NI225 climbed 0.13%, Hong Kong's Hang Seng Index (HSI) increased by about 1%, and Chinese blue chips (3399300) edged 0.19% higher. Global stock markets have rallied amid growing expectations of a Federal Reserve easing cycle likely to start in September, with Fed Chair Jerome Powell stating on Tuesday that the U.S. economy is "no longer overheated." However, Powell provided few clues about the timing of potential rate cuts.


In the FX space, as anticipated, the RBNZ maintained its cash rate at 5.5% on Wednesday, noting that inflation is expected to fall within the 1% to 3% target range in the second half of the year. Following this announcement, the New Zealand dollar NZDUSD dropped over 0.7%, reaching $0.6079, with analysts highlighting the RBNZ's comparatively dovish tone compared to May's policy statement. Traders swiftly increased their bets on rate cuts from the RBNZ later this year, with swaps now implying about 30 basis points of easing in October, compared to 16 basis points before the announcement. Meanwhile, the Australian dollar rallied over 0.6% to hit a more than one-year high against the New Zealand dollar AUDNZD. This was supported by expectations that the next move in Australian interest rates might be upwards due to persistent inflation.


Markets are now pricing in over a 70% chance of a Fed rate cut in September, up from a near-even chance a month ago, according to the CME FedWatch tool. Despite the rise in U.S. rate cut expectations, the dollar DXY remained robust on Wednesday. This left the British pound GBPUSD steady at $1.2787, while the euro EURUSD was little changed at $1.0815. Against the yen USDJPY, the dollar rose 0.15% to 161.54, with the Japanese currency pressured by significant interest rate differentials between the U.S. and Japan. Elsewhere in Asia, data on Wednesday showed that China's consumer prices grew for the fifth month in June but fell short of expectations, while producer price deflation persisted. Government support measures are setting a bumpy recovery path for the world's second-largest economy.


Data released on Wednesday indicated that Japan's wholesale inflation accelerated in June as the yen's decline increased the cost of raw material imports, keeping market expectations alive for a near-term interest rate hike by the Bank of Japan. The Bank noted on Tuesday that some market participants had called for a reduction in its bond-buying pace under a scheduled tapering plan due this month.


In the commodities and agricultural commodities market, oil prices ticked lower. Brent futures BRN1! fell 0.11% to $84.57 a barrel, while U.S. West Texas Intermediate (WTI) crude CL1! eased 0.01% to $81.40 per barrel. GOLD gained 0.2% to $2,368.15 an ounce. Three-month copper on the LME HG1! was trading flat at $9,870 per metric. CBOT wheat ZW1! was 0.26% lower at $5.7-1/2 a bushel. September arabica coffee KC2! edged 6.6% higher at $2.4995 per lb.


 

General news - Information source from multiple newswires.

The article and the data is for general information use only, not advice!

The Trade Academy Team

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