China Stimulus Measures Steady Global Equity Markets

Xe Corporate APAC

February 4, 2020 2 min read

The AUDUSD opens at 0.6737 (mid-rate) and the NZDUSD opens at 0.6488 (mid-rate) this morning.

Risk appetite has increased sharply amid expectations China will add more stimulus measures to provide liquidity to markets. With the Shanghai index leading the way yesterday afternoon, global equity markets along risk-linked currencies and US Treasuries yields have rallied strongly overnight.

The AUD is the strongest of the G10 currencies with the NZD also outperforming its major trading partners. As expected in a “risk-on” environment the JPY has given back some of its recent gains.

The AUD rallied late yesterday after the RBA announced it was holding rates steady at 0.75% and indicated further cuts to the cash rate are unlikely in the short-term. Gov Philip Lowe’s statement had a “hawkish” tone to it informing the market that the three rate cuts it announced in 2019 were stimulating a gentle increase in activity at a local level and that this should lift GDP growth to a three year high in 2020.

Although the coronavirus outbreak continues to grow with at least 20,000 confirmed cases, and 427 deaths the containment measures including travel bans seem to limiting the spread worldwide and the fears of a possible global pandemic.

This morning’s GDT auction wasn’t as bad as feared with the overall index falling 4.7%. markets had forecast a fall of 5%-10%. A total of 29,006MT of product was sold on the day with whole milk powder (WMP) prices tumbling 6.2%.

Global equity markets are up sharply - Dow +1.63%, S&P 500 +1.66%, FTSE +1.55%, DAX +1.81%, CAC +1.76%, Nikkei +0.49%, Shanghai +0.34%

Gold prices are marginally lower, down 1.6% trading at $1,550 an ounce. WTI Crude Oil prices are little changed at 50.69 a barrel.

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