Chinese indices rise on PBoC stimulus. In Australia, inflationary pressures are easing

At Tuesday’s close, the Dow Jones Index (US30) was up 0.20%, while the S&P 500 Index (US500) added 0.25%. The NASDAQ Technology Index (US100) closed positive 0.56%. 

Hawkish comments from Fed Chair Bowman, the only dissenter to last week’s 50 bps cut in the Fed Funds rate, put some pressure on stocks on Tuesday when she said the Fed should cut interest rates at a “moderate” pace as inflation risks persist and the labor market is not showing much weakening. The Conference Board’s Consumer Confidence Index for September unexpectedly fell by 6.9 to 98.7 against expectations for a rise to 104.0. The Richmond Fed survey for September unexpectedly fell 2 to a 4–1/3 year low of 21, weaker than expectations of a rise to 12. Markets await inflation news on Friday when the core PCE Price Index, the Fed’s preferred gauge of inflation, is released. Consensus expects the PCE Price Index to rise 0.2% m/m in August and increase 2.7% y/y from 2.6% y/y in July.

Equity markets in Europe were mostly up on Tuesday. Germany’s DAX (DE40) rose by 0.80%, France’s CAC 40 (FR40) closed 1.28% higher, Spain’s IBEX 35 (ES35) gained 0.33%, and the UK’s FTSE 100 (UK100) closed up 0.28%. Weak economic data reinforced expectations that the ECB would ease monetary policy to support the struggling European economy. The latest data showed that business morale in Germany fell more than expected to an 8-month low.

Sweden’s Riksbank cut its key rate by 25 basis points to 3.25% at its September 2024 meeting, following a similar move in August and in line with market expectations. In addition, policymakers have signaled further rate cuts at the two remaining monetary policy meetings this year if the outlook for inflation and economic activity remains unchanged, with one of those meetings potentially cutting the rate by 50 basis points. 

WTI crude oil prices hovered near $71.4 a barrel on Wednesday, trying to extend the previous session’s gains as markets continued to assess China’s economic intervention. On Tuesday, China’s central bank announced the largest economic stimulus in four years and growth targets, improving the outlook for demand from the world’s top oil importer. At the same time, fears of supply disruptions in the Middle East are growing as risks of a wider conflict escalate.

Asian markets were mostly up yesterday. Japan’s Nikkei 225 (JP225) decreased by 1.08%, China’s FTSE China A50 (CHA50) was up 6.04%, Hong Kong’s Hang Seng (HK50) added 4.06%, and Australia’s ASX 200 (AU200) was positive 0.28%. Chinese indices rose for a second day and held firmly at their highest level in four months as all sectors made further strong gains. Aggressive stimulus measures adopted by China’s Central Bank on Tuesday to support the ailing economy continued to boost sentiment. 

The Australian dollar climbed to $0.69, ending at its highest level since February 2023, as investors reacted to the latest inflation report. The data showed Australia’s monthly Consumer Price Index fell to a three-year low of 2.7% in August, back within the Central Bank’s target range of 2–3%, although the drop was mainly due to temporary government energy rebates. The Australian dollar also rose thanks to China’s latest stimulus package, which could support demand in Australia’s biggest export market.