The Bank of Japan is finally out of negative rate territory. The RBA left the rate unchanged but removed the hawkish bias :: InvestMacro

By JustMarkets

The Dow Jones Index (US30) was up 0.20% at Monday’s stock market close. The S&P 500 Index (US500) added 0.63%. The NASDAQ Technology Index (US100) closed positive 0.82%. Tesla (TSLA) stock price rose more than 6% and led the S&P 500 and Nasdaq 100 stocks higher after the company announced on website X that it would raise the price of all US Model Y vehicles by $1,000 on April 1. Alphabet (GOOGL) stock is up more than 4% after it was reported that Apple is in talks to embed Google’s Gemini artificial intelligence search engine into the iPhone.

Canada’s inflation report will be released today. No changes in the figures are expected, so the Canadian dollar will likely be affected by volatility. However, any deviations from the consensus forecast could trigger a strong rally. Remember that when inflation rises, the domestic currency tends to strengthen on expectations of a more hawkish central bank stance.

Equity markets in Europe were mostly down on Monday. Germany’s DAX (DE40) was down 0.02%, France’s CAC 40 (FR40) fell by 0.20% yesterday, Spain’s IBEX 35 (ES35) decreased by 0.01% and the UK’s FTSE 100 (UK100) closed negative 0.06%.

ECB Governing Council spokesman de Kos said yesterday that the ECB has achieved its goal of bringing inflation to 2%, which is compatible with an interest rate cut in the near term. Swaps put the odds of a 25 bps ECB rate cut at 7% at the next meeting on April 11 and 80% at the June 6 meeting.

Silver gained support yesterday on the back of global economic news on Monday. This news showed that February industrial production in China rose more than expected and that the March NAHB housing market index in the US unexpectedly rose, which is favorable for industrial metals demand.

Asian markets were up yesterday. Japan’s Nikkei 225 (JP225) ended the day up 2.67%, China’s FTSE China A50 (CHA50) added 0.57%, Hong Kong’s Hang Seng (HK50) jumped by 0.97% on the day, and Australia’s ASX 200 (AU200) was positive 0.07%. Chinese stocks rose on Monday as data showed that retail sales, industrial production, and fixed asset investment in China rose more than expected in the year’s first two months. Traders now await tomorrow’s People’s Bank of China’s (PBoC) decision on one-year and five-year loans. No changes are expected, but volatility on Asian indices could rise markedly.

The Bank of Japan (BoJ) raised interest rates to 0% from 0.1% for the first time since 2007, ending eight years of negative rates amid rising wages and high inflation. The central bank also abandoned its policy of controlling the yield curve, no longer targeting 10-year bond yields. In addition, the board agreed to stop buying ETFs and J-REITs and to gradually reduce its purchases of commercial paper and corporate bonds, with plans to stop buying bonds completely in about a year.

The Reserve Bank of Australia (RBA) left rates unchanged at 4.35%, as expected, but retracted its previous warning that further rate hikes were not ruled out. This indicates confidence that inflation will continue to fall and raises bets that the RBA may start cutting rates later this year. Markets are pricing in the first rate cut in August, predicting 40 basis points of overall easing this year.

S&P 500 (US500) 5,149.42 +32.33 (+0.63%)

Dow Jones (US30) 38,790.43 +75.66 (+0.20%)

DAX (DE40) 17,932.68 −3.97 (−0.02%)

FTSE 100 (UK100) 7,722.55 −4.87 (−0.06%)

USD Index 103.58 +0.15 (+0.15%)

Important events today:

• – Japan BoJ Interest Rate Decision at 04:30 (GMT+2);
• – Japan BoJ Monetary Policy Statement at 04:30 (GMT+2);
• – Australia RBA Interest Rate Decision at 05:30 (GMT+2);
• – Australia RBA Rate Statement at 05:30 (GMT+2);
• – German ZEW Economic Sentiment (m/m) at 12:00 (GMT+2);
• – Eurozone ZEW Economic Sentiment (m/m) at 12:00 (GMT+2);
• – US Building Permits (m/m) at 14:30 (GMT+2);
• – Canada Consumer Price Index (m/m) at 14:30 (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.