Last week, the major economic news was a somewhat surprising announcement from the ECB that it is cutting the deposit rates to -0.4% and increasing purchases of bonds by a further Euro 20 billion to 80 billion a month starting in April. ECB also dropped the interest rates on the refinance operations by 5 basis points to flat 0%. The main objectives are to stimulate credit provision (paying banks to lend money) and accelerate Euro zone's economic growth but keep inflation close to 2%. Mario Draghi's press conference following the announcement confirmed what financial markets were fearing that there is a limit as to how much the central bank can do to trigger economic activity without political support from the governments and a strategy to withstand the slowdown in the Chinese economy. The signs following the announcement quickly went in the wrong direction following the press conference as the Euro climbed to USD 1.11 and the stock markets retreated.
RBNZ CUTS RATES
The Reserve Bank of New Zealand cut rates by 25 basis points to 2.25% in a surprise move last week. RBNZ cited weak global economic growth, weakness and challenges in the dairy industry and low inflation outlook as the reasons for the rate cut which markets were expecting but not this soon. The NZD weakened and dragged the Aussie dollar down initially but the announcements in Europe and higher commodity prices since last few weeks resulted in the AUD climbing past 75 US cents but retreated to 74.88 US cents at 4 p.m. on Friday.
CONSUMER SENTIMENT WEAKENS
The Westpac-Melbourne Institute index of consumer sentiment weakened in March from 101.3 in February to 99.1. The consumer sentiment index which gained after PM Turnbull assumed the PM's post has now retreated. Consumers have preferred paying down debt to de-risk themselves as their main priority.
MARKET SNAPSHOT FOR THE WEEK
| Australia Cash rate Australia 90 day bank bill Australia 10 y bond US 10y Govt bond AUD/USD AUD/EUR AUD/JPY AUD/CNY ASX 200 S&P 500 Dow Jones Shanghai Composite Brent Oil (USD per BBL) Gold Spot (USD per oz) | As at 11-Mar 2.00 2.33 2.67 1.98 0.7488 0.6705 85.02 4.8591 5166 2022 17213 2810 40.39 1250 | As at 4-Mar 2.00 2.32 2.55 1.87 0.7365 0.6728 83.74 4.7996 5090 1999 17006 2874 38.72 1258.95 |
RSS Feed