Interest rate markets are backing away from future central bank cuts as data shows both US and China trade is suffering. The hard evidence of declining exports for both nations increases the pressure for a phase one agreement. The details of the initial deal are emerging, and investors continue their tilt back to growth exposures, lifting shares and industrial commodities.
The US Commerce Department data showed exports to China dropped 10% in September, and imports were down 4.9%. Two-way trade is at multi-month lows. In return for increased agricultural purchases and protection of intellectual property, China news agencies insisted tariffs must be wound back simultaneously and the threat of increases abandoned.
The fleshing out of an imminent agreement is driving interest rates higher. US ten-year bonds hit three-month highs overnight. Short-term interest rate markets now reflect just a 50% chance of a US cut by June next year. A positive statement from the Reserve Bank of Australia yesterday lifted local rates, and the implied probability of further reductions is now less than 50% out to September 2020.
Futures markets point to further rises for Asia Pacific markets today. Energy stocks are in focus as crude oil markets hit six-week highs. Financial stocks could also feature in Australia on early indications that Westpac Bank will bounce back from the pressure of this week’s two billion dollar share placement.
CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.