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US Session Update – Asian Markets React to Central Bank Decision and Inflation Trends

What happened in the Asia session?

As widely expected, the Reserve Bank of Australia (RBA) kept its cash rate on hold at 4.10% for the third meeting in a row. The statement indicated that this decision to hold rates once more will provide further time for the RBA to assess the impact of higher interest rates and the outlook for the Australian economy. Inflation has passed its peak with the recent monthly CPI indicator easing to 4.9% YoY. However, inflation is still too high and will remain so for some time, the statement added. The Aussie dropped as low as 0.6415 in the aftermath of the announcement but could move higher on the back of a relatively hawkish statement.

What does it mean for the US sessions?

The final services and Composite PMIs for the Eurozone and the UK will be released during the European trading hours. With the flash surveys pointing to a contraction in services activity, overall economic growth for Europe as a whole does appear to be slowing down – weaker than expected PMI readings are likely to weigh on both the Euro and the Pound.

Global Markets:

  •  Asian Stock Markets : Nikkei up 0.27%, Shanghai Composite down 0.74%, Hang Seng down 2.05%, ASX down 0.06%
  • Commodities : Gold at $1961.25 (-0.23%), Silver at $24.06 (-1.07%), Brent Oil at $88.75 (-0.312%), WTI Oil at $85.77 (-0.29%)
  • Rates : US 10-year yield at 4.223, UK 10-year yield at 4.503, Germany 10-year yield at 2.584

News & Data:

  • (GBP) BRC Retail sales monitor y/y 4.3% vs 2.2% expected
  • (JPY) Household spending y/y -5.0% vs -2.4% expected

Markets Update:

Australia’s central bank, the Reserve Bank of Australia, has chosen to maintain its benchmark policy rate at 4.1% for the third consecutive month. This decision was widely anticipated by economists polled by Reuters. As a result, Australia’s S&P/ASX 200 index experienced a decline of 0.33% following the announcement.

Inflation data played a significant role in market dynamics. South Korea reported a higher-than-expected inflation rate of 3.4% for August, with investors eagerly awaiting inflation data releases from Thailand and the Philippines later in the day. Moreover, the market’s attention was focused on Purchasing Managers Index (PMI) readings from economic giants like China, India, and Hong Kong.

Across the region, various stock indices reacted differently. South Korea’s Kospi index slid by 0.2%, while the Kosdaq saw a more substantial loss of 0.37%. The Hong Kong Hang Seng index led the losses in the Asia-Pacific region with a notable drop of 2.05%. Additionally, mainland Chinese markets were in negative territory, with the CSI 300 index down by 0.24%.

In the United States, markets were closed on Monday in observance of the Labor Day holiday. However, futures for the three major U.S. indexes showed minimal changes, with Dow Jones Industrial Average and S&P 500 futures slightly below the flatline, while Nasdaq Composite futures hovered slightly above it.

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