The Bank of Mexico unexpectedly cut its interest rate. China’s consumer inflation is on the rise :: InvestMacro

By JustMarkets

At Thursday’s close, the Dow Jones Industrial Average (US30) was up 1.76%, while the S&P 500 Index (US500) added 2.30%. The NASDAQ Technology Index (US100) closed positive 2.87% on Thursday. Stocks rose on Thursday after the weekly number of US initial jobless claims fell more than expected, indicating the strength of the labor market and easing economic concerns following last Friday’s weaker-than-expected July payrolls report. In addition, chip stocks recovered some of Wednesday’s losses and rallied sharply on Thursday, boosting the overall market.

Bitcoin rose more than 10% and surpassed the $61,000 mark, hitting a one-week high. Earlier this week, bitcoin fell to nearly $49,000 as fears of a US recession and the unwinding of yen deals triggered a global sell-off in risky assets. Cryptocurrencies and other risk assets are gradually returning, as analysts say the sell-off was an overreaction. Bitcoin exchange-traded funds have also seen massive inflows in recent sessions after Morgan Stanley allowed financial advisers to recommend Bitcoin ETFs to clients.

On Thursday, analysts expressed shock over the Mexican central bank’s decision to cut interest rates on the same day that official data showed a sharp rise in domestic inflation. The Bank of Mexico cut its benchmark interest rate by 0.25% to 10.75% in August 2024, defying market expectations amid ongoing economic concerns. Global economic growth is expected to slow, and inflation in advanced economies is generally expected to decline. There was significant market volatility in Mexico, driven by the depreciation of the peso (USD/MXN) and rising government bond yields. Meanwhile, annual core inflation rose from 5.10% in June to 5.57% in July, mainly due to non-core inflation, while core inflation declined from 4.05% to 4.00%.

Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE40) rose by 0.37%, France’s CAC 40 (FR40) closed down 0.26%, Spain’s IBEX 35 (ES35) lost 0.39%, and the UK’s FTSE 100 (UK100) closed negative 0.27% on Thursday.

The US natural gas (XNG/USD) prices eased losses and are trading near $2.1/MMBtu after the EIA reported a smaller-than-expected increase in storage inventories. The US utilities added 21 billion cubic feet of gas to storage last week, slightly below the market forecast of 22 billion cubic feet. According to the report, gas in storage is 14.9% above the 5-year average, down from 39% in March and 19% in June. Meanwhile, major US natural gas producers are planning further production cuts in the second half of 2024

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.74%, China’s FTSE China A50 (CHA50) added 0.36%, Hong Kong’s Hang Seng (HK50) ended Thursday up 0.08%, and Australia’s ASX 200 (AU200) was negative 0.23%. Hong Kong stocks soared nearly 2% in early trading on Friday, rising for a third day as investors reacted to fresh data from China. Consumer prices in the country rose to 0.5% y/y in July, beating forecasts of 0.3% amid Beijing’s efforts to stimulate consumption. Meanwhile, producer prices fell by 0.8%, below the forecast of a 0.9% drop. In addition, there were signs that some global investors viewed China’s markets as a safe haven after Monday’s sell-off.

The Australian dollar rose to $0.66, hitting a two-week high, as easing fears of a US recession spurred gains in risk assets. The Australian dollar received support from hawkish central bank statements. Reserve Bank of Australia (RBA) Governor Michelle Bullock said they would not hesitate to raise interest rates again to fight inflation. She warned that Australia’s economic outlook remains highly uncertain and that the Board should remain vigilant against upside risks to inflation.

A summary of views from the Bank of Japan’s July policy meeting showed that some members favored raising rates further, with one saying they should eventually be brought to at least 1 percent.

S&P 500 (US500) 5,199.50 −40.53 (−0.77%)

Dow Jones (US30) 38,763.45 −234.21 (−0.60%)

DAX (DE40) 17,615.15 +260.83 (+1.50%)

FTSE 100 (UK100) 8,166.88 +140.19 (+1.75%)

USD Index 103.20 +0.24 (+0.23%)

Important events today:

• – China Consumer Price Index (m/m) at 04:30 (GMT+3);
• – China Producer Price Index (m/m) at 04:30 (GMT+3);
• – German Consumer Price Index (m/m) at 09:00 (GMT+3);
• – Canada Unemployment Rate (m/m) at 15:30 (GMT+3).

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.