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Australian central bank cuts rates for first time in more than four years

Australia’s central bank lowered its cash rate on Tuesday, marking the first reduction since November 2020. The move provides some relief to borrowers but left the Australian dollar largely unchanged. The S&P/ASX 200 dipped following the announcement, while most other equity markets in the Asia-Pacific region were trading higher, buoyed by supportive comments from China’s leadership towards the private sector. Meanwhile, European markets gained to start the week on hopes for a Ukraine ceasefire, while US markets were closed on Monday for a public holiday. Gold prices rose, trading around USD 2910 per ounce. 

Date
Auteur
Shane Strowmatt, LGT
Temps de lecture
5 minutes

Reserve Bank of Australia
© Shutterstock

Australia's central bank reduced its cash rate by 0.25% to 4.1% on Tuesday, as expected by markets, marking the first cut since November 2020. The Reserve Bank of Australia (RBA) remains cautious about further easing, citing persistent inflation risks despite a recent decline in core inflation to 3.2% in the fourth quarter. This rate cut offers relief to borrowers and is seen as favourable for Prime Minister Anthony Albanese amid upcoming elections. The RBA emphasised the need for more data before considering additional rate reductions. The Australian dollar was little changed versus the US dollar, while Australia’s S&P/ASX 200 was down 0.7% after the announcement.

Asia markets mixed on supportive private sector comments from China

Asian markets mostly increased on Tuesday following supportive comments towards the private sector from Chinese President Xi Jinping. China's National Development and Reform Commission (NDRC) said on Tuesday that the country's current environment is highly favourable for private economic growth and announced plans to dismantle investment barriers and revise restrictions to market access. Following President Xi Jinping's meeting with tech industry leaders on Monday, the NDRC aims to promote fair access to infrastructure and alleviate financing challenges for private firms. Hong Kong’s Hang Seng Index surged 0.8%, but mainland China’s CSI 300 dropped 0.7% on Tuesday. Japan’s Nikkei 225 was trading 0.3% higher, while Korea’s Kospi climbed 0.6%.

Ukraine ceasefire hopes boost European markets

European stock markets saw a positive shift on Monday as hopes for a ceasefire between Russia and Ukraine lifted investor sentiment. The STOXX 50 index reached a record high closing at 5519.75 points, up 0.5% on the day. Germany’s DAX surged 1.3% and France’s CAC 40 edged up 0.1%. The Swiss Market Index also rose 0.3%. US and Russian officials were meeting in Saudia Arabia to discuss a potential peace deal to start the week. A ceasefire could lower energy costs and support growth, but the extent of recovery hinges on the resumption of Russian gas flows.

Corporate and economic calendar

Corporate news in focus: Quarterly figures from Medtronic and Siemens Healthineers. Annual general meeting at Siemens Healthineers.

Economic data in focus: UK unemployment rate (08:00), Swiss industrial production (08:30), German ZEW Indicator of Economic Sentiment (11:00), Canadian Consumer Price Index (14:30), Empire State Manufacturing Survey (14:30).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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