Tuesday, February 18, 2020

PBoC’s medium-term lending rate cut helps CSI300 to rebound; Aussie falls after RBA releases its meeting minutes

Tags
  • China
  • Gold
  • Pound
  • Stocks
  • RBA

02182020a

Market Recap: PBoC’s medium-term lending rate cut helps CSI300 to rebound; Aussie falls after RBA releases its meeting minutes

The PBoC cut its medium-term one-year lending rates by 10bps to 3.15%, the lowest since 2017 to help relieve its economy from the negative impact of the coronavirus outbreak. The central bank also added 100bn yuan worth of funds into the economy using seven-day reverse repurchase agreements. The move by the Chinese central bank helped to lift most stocks across the world. The FTSE100, Euro Stoxx and German Dax all ended Monday higher in the European region while major indices in Asia were mixed.

The CSI300 gained 2.25% to 4,077.42, almost recovering all of its losses since the extended Lunar New Year holiday. The Nikkei retreated after the Japanese economy contracted more than expected, while the STI remained subdued after Singapore downgraded its 2020 economic growth forecast as a result of the coronavirus outbreak.

Indexes Change (%) Net Change Closing Price
FTSE100 +0.33% +24.12 7,433.25
Euro Stoxx +0.32% +12.30 3,853.27
DAX +0.29% +39.68 13,783.89
Nikkei -0.69% -164.35 23,523.24
KOSPI -0.06% -1.42 2,242.17
CSI300 +2.25% +89.69 4,077.42
ASX200 -0.07% -5.15 7,125.05
Hang Seng +0.52% +144.00 27,959.60
Straits Times -0.22% -7.03 3,213.00
*Source: Bloomberg

Sterling fell on Monday after the UK's Chief Brexit negotiator David Frost dismissed the EU's position that the UK should be bound by the bloc's rules as part of any trade deal. On Tuesday morning, the RBA's meeting minutes confirmed our expectations that RBA officials decided against a rate cut to avoid encouraging increased debt to fund housing purchases. AUD/USD fell on the news, to 0.6690 or a 0.36% drop as of 9.10am (GMT +8).

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Safe haven assets fell as investors expect China's continued stimulus to help relieve the global economy of a larger-than-expected slowdown thanks to the coronavirus outbreak. Gold and yen both fell on Monday.

Safe Haven Assets Change (%) Net Change Closing Price
Gold -0.19% -2.93 1,581.13
Silver -0.27% -0.05 17.69
JPY -0.09% -0.10 109.88
*Source: Bloomberg

Brent crude oil gained for the its fifth day in a row on Monday as crude oil prices continue to recover from losses earlier in the year amid the virus outbreak.

Oil Futures Change (%) Net Change Closing Price
Brent Crude +0.61% +0.35 57.67
*Source: Bloomberg

Meanwhile, major Asian indices looks set for a second day of losses after the WTO said that global trade is likely to stay weak for months as a result of the coronavirus outbreak. Apple's announcement that it doesn't expect to meet its revenue guidance for this quarter thanks to supply constraints by the coronavirus outbreak is also likely to rattle investors. The Nikkei, KOSPI and ASX200 were all lower early into Tuesday's trading session.

Asia Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index -0.73% -170.92 23,383.99 8:09:25 AM
KOSPI Index -0.62% -13.95 2,228.57 8:29:20 AM
ASX200 Index -0.23% -16.05 7,108.60 8:29:05 AM
*Source: Bloomberg

Economic releases for the day ahead include (all timings in GMT +8):

  • UK Dec Unemployment Rate (ILO) (5.30pm)
  • Germany Feb Economic Sentiment (ZEW) (6pm)