New Zealand’s central bank has unexpectedly cut interest rates after it stated that its economy was contracting faster than anticipated. The Reserve Bank of New Zealand had indicated that monetary policy needs to remain restrictive but opted to cut the interest rate to 5.25% from 5.5%. This follows central banks in Canada and the UK, which have reduced borrowing costs in recent months. The market had started to price in a cut in recent days despite many economists expecting the RBNZ to hold. The New Zealand dollar weakened over 1% to NZ$0.60 per US dollar, 10-year benchmark bond yields slumped, and stocks rallied on the news.
Chinese equities led declines in Asia overnight after official data showed slowing loan growth in Asia’s largest economy. Official data published on Tuesday evening showed new loan growth of just CNY 260 billion in July, well below the CNY 450 billion consensus, and the first contraction in 19 years. Both China’s benchmark CSI 300 and Hong Kong’s Hang Seng index have dropped 0.6% during trading today. New Zealand’s S&P/NZX 50 index led gains in the region, rising 1.2% after the central bank’s decision to cut rates. Japan’s benchmark Topix added 1.1% after Prime Minister Fumio Kishida announced he was stepping down next month. The yen strengthened 0.3% against the dollar.
US CPI data is due today, and US stocks closed higher yesterday—a fourth consecutive gain—as traders await the release of the consumer price index report while assessing soft wholesale inflation data from Tuesday. The S&P 500 advanced 1.7%, with technology being the best-performing sector, followed by consumer cyclicals as Starbucks enjoyed a 24.5% rally following the appointment of a new CEO. The Nasdaq Composite rose 2.4% as every Magnificent Seven constituent advanced. Treasuries rallied after price growth for US producers came in lower than expected in July, adding to hopes for looser US monetary policy. The yield on the 10-year note fell to 3.86%, while the yield on the two-year note fell to 3.99%.
Elsewhere, Bitcoin rose 0.6% to $60,957.07, and Ether rose 0.9% to $2,724.03, while WTI crude rose 0.6% to $78.84 a barrel.
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