European indices set new price highs. PBoC cut the rate on 5-year loans :: InvestMacro

By JustMarkets

Due to a bank holiday, the US stock market was not trading on Monday.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE40) lost 0.15%, France’s CAC 40 (FR40) gained 0.01% yesterday, Spain’s IBEX 35 (ES35) jumped by 0.59% on Monday, and the UK’s FTSE 100 (UK100) closed positive 0.22%. The FTSE 100 Index gained momentum and closed at 7730 on Monday, its highest level all year. Investors are gearing up for the week ahead as key data such as the flash Eurozone PMI and final inflation data will be released. The market also looks forward to the Fed and ECB meeting minutes and semiconductor giant Nvidia Corp’s (NVDA) earnings report.

Silver (XAGUSD) prices are trading around $23 an ounce, moving away from the seven-week high of $23.4 an ounce reached on February 16, as traders continue adjusting their bets on a Fed rate cut. Upcoming FOMC meeting minutes and statements from Fed officials will provide more clues as to when the first rate cut may occur. Originally expected to be cut in March, there is now a 53% chance of a 25 bps rate cut in June. Silver prices are expected to rise this year thanks to a weaker dollar and lower Treasury bond yields as the Fed moves to looser monetary policy.

On Tuesday, Brent crude oil prices held near three-week highs above $83 a barrel as heightened geopolitical tensions in the Middle East continue to raise supply concerns. The Houthi rebel group in Yemen launched fresh strikes on shipping lanes in the Red Sea and Bab al-Mandab Strait, with at least four more ships hit by drone strikes or missiles since Friday. Investors were also cheered by strong travel data from China, a significant importer of crude oil.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.04% for the day, China’s FTSE China A50 (CHA50) was up 0.82% after the holidays, Hong Kong’s Hang Seng (HK50) lost 1.13% on Monday, and Australia’s ASX 200 (AU200) was positive 0.09% on the day.

The offshore yuan (CNY) is holding near 7.20 per dollar as investors reacted to the central bank’s latest decision. The People’s Bank of China (PBoC) cut its main five-year lending rate by 25 basis points to 3/95%, beating forecasts for a 15 bps cut. It was the most aggressive cut since this rate was introduced in 2019 as China continues to struggle with a sluggish economic recovery. Meanwhile, the PBoC left the one-year lending rate unchanged at 3.45%. Earlier this week, investors were cheered by strong travel data from China during the Lunar New Year celebrations, which exceeded pre-New Year’s Eve levels this year.

The Australian dollar fell to $0.652, pulling back from two-week highs, as investors digested the latest central bank meeting minutes. The Reserve Bank of Australia’s (RBA) February meeting discussed the possibility of further interest rate hikes but ultimately decided to maintain current monetary settings given signs of moderate inflation. The RBA also indicated it needed more time to see if inflation was returning to target before ruling out the possibility of further rate hikes. Markets expect the central bank to cut interest rates by a total of about 40 basis points this year, with the first move coming in August.

S&P 500 (US500) 5,005.57 0 (0%)

Dow Jones (US30) 38,627.99 0 (0%)

DAX (DE40)  17,092.26 −25.18 (−0.15%)

FTSE 100 (UK100) 7,728.50 +16.79  (+0.22%)

USD Index  104.24 −0.05 (−0.05%)

Important events today:

• – Australia RBA Monetary Policy Meeting Minutes at 02:30 (GMT+2);
• – China PBoC Prime Rate (m/m) at 03:15 (GMT+2);
• – Switzerland Trade Balance (m/m) at 09:00 (GMT+2);
• – Canada Consumer Price Index (m/m) at 15:30 (GMT+2).

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.