US market recovering ground after record highs
RBA maintains cash rate, China’s market rallies, US markets stable under Fed’s guise. Global markets catch short respite.
RBA Maintains Cash Rate
The Reserve Bank of Australia (RBA) announced its decision to keep the cash rate target unchanged at 4.35% and maintained the interest rate on Exchange Settlement balances at 4.25%. Inflationary pressures continued to ease in the December quarter, although inflation remains high at 4.1%.
Goods price inflation saw a decline, attributed to the resolution of global supply chain disruptions and a moderation in domestic demand for goods. However, services price inflation, reflective of excess demand in the economy and strong domestic cost pressures, remained high.
The RBA’s central forecasts suggest a gradual return of inflation to the target range of 2-3% by 2025, with services price inflation expected to decrease as demand moderates. Employment is projected to grow moderately, with anticipated increases in the unemployment rate and broader underutilization rate.
China’s Market Rally
Global barter experienced a rebound, primarily led by China, where benchmark stock indexes recorded their most significant one-day jump in nearly two years. Reports of government intervention to address trade turmoil, including regulatory actions and state-sponsored purchases, contributed to the rally. Concerns over foreign capital flight, geopolitical tensions, and domestic deflation persisted amidst a property downturn.
The market’s downturn was exacerbated by remarks from US presidential candidate Donald Trump regarding potential tariffs on China. Despite the bounceback, anxieties regarding a downward spiral remained prevalent, prompting discussions between President Xi Jinping and financial regulators. China’s offshore yuan saw a recovery against the US dollar, but attention shifted to forthcoming consumer price updates expected to indicate deepening annual headline deflation.
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Quick US Market Summary
US businesses witnessed stability as bond trading fluctuations eased following sharp swings. The S&P 500 and Nasdaq composite registered slight gains, reflecting optimism surrounding strong corporate profits despite uncertainties regarding Federal Reserve rate cuts. Expectations for immediate easing diminished following Fed Chair Jerome Powell’s remarks, tempering previous business anticipations.
Earnings reports from companies like Eli Lilly and GE Healthcare Technologies exceeded expectations, contributing to business buoyancy. However, FMC experienced a downturn due to lower-than-anticipated profit and revenue, partially attributed to adverse weather conditions in Brazil. In the bond market, the yield on the 10-year Treasury relaxed slightly after recent highs, influenced by positive job marketplace reports and strong economic indicators.
Final Market Highlights
Elsewhere, London-listed BP saw a rise in shares following robust fourth-quarter earnings, while UBS faced a decline after integrating Credit Suisse. European exchanges experienced mixed movements, with the FTSE 100 up 0.7% driven by BP’s performance. Asian markets saw significant gains in Chinese indexes, albeit remaining down for the year due to economic recovery concerns and real estate challenges. Overall, global exchanges navigated various economic and geopolitical uncertainties, finding stability amidst regulatory interventions and corporate earnings performances.
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