Global stocks are celebrating the Fed’s big rate cut as confirmation of a soft landing. The Bank of England holds rates, as expected. The Bank of Japan is also seen holding later today. NZ GDP contracts less than the RBNZ forecast, reducing chances of an oversized cut. Australia’s jobs market continues to give the RBA a headache.
In our bonus deep dive interview, ANZ Economist Henry Russell details the trip hazards of relying on high-frequency indicators, which the Reserve Bank of New Zealand may have just fallen over with its June quarter GDP forecast.
5 things to know:
Global stocks are up 2%-3% the day after the Fed’s big rate cut. ANZ Economist Bansi Madhavani says US jobless claims overnight were solid and reinforced investor hopes the Fed has just pulled off the softest of soft landings.
The Aussie and Kiwi dollars are firm this morning with risk appetites definitely on. Firm economic data in Australia and New Zealand also helped, says ANZ’s Head of FX Research Mahjabeen Zaman on the reaction in financial markets.
New Zealand’s economy contracted 0.2% in the June quarter, above the negative 0.4% consensus and negative 0.5% the RBNZ forecast. ANZ Economist Henry Russell says ‘high-frequency’ leading indicators overstated economic weakness.
Australia’s labour market continues to outperform. Jobs grew nearly 50,000 in August, double expectations. ANZ Senior Economist Catherine Birch says the strength supports ANZ Research’s view that the RBA won’t cut until February, although the risks are pointing to an even later move.
The market focus now turns to today’s decision from the Bank of Japan, which is partway through a tightening cycle. ANZ Senior Economist Tom Kenny is expecting a hold at 0.25% after July’s 15 basis point increase.
Cheers
Bernard
PS: Catch you next week with analysis of what happens now the Fed has started easing.
