The Australian dollar rose overnight. It was fetching 68.94 US cents at 11.30am AEST. Iron ore prices jumped more than 6 per cent on the China stimulus.
Financial markets have been mostly ebullient after the Federal Reserve made a drastic turn last week in how it sets interest rates. It’s now lowering rates to make things easier for the US economy after keeping them high for years in hopes of extinguishing high inflation.
One of the risks that’s still hanging over the market is the struggling Chinese economy and how much its flagging growth may affect the rest of the world. After earlier delivering some modest and piecemeal moves, the chief of China’s central bank announced more measures, including lower interest rates and a reduction in the amount of reserves banks are required to keep.
Analysts called the coordinated moves encouraging, and they helped stocks soar in China. Indexes jumped 4.2 per cent in Shanghai and 4.1 per cent in Hong Kong. But questions still remain about how much they will boost the economy, which has been struggling since Chinese authorities cracked down on excessive borrowing by property developers.
Prices for crude oil and other commodities that a healthy Chinese economy would devour nevertheless climbed. Copper gained 3.5 per cent.
Another risk hanging over Wall Street is the slowing US job market. Now that inflation has eased substantially from its peak two summers ago, the main worry among investors is that a slowdown in hiring by US companies may worsen.
Moves to interest rates can take a notoriously long time to make their way fully through the economy, and the Federal Reserve had been keeping its main interest rate at a two-decade high for more than a year before last week. It did cut by an unusually large amount in hopes of providing relief to the job market and economy.
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In the bond market, Treasury yields slipped after the weaker-than-expected report on consumer confidence erased earlier gains. The 10-year yield fell to 3.73 per cent, from 3.75 per cent late Monday. The two-year yield, which more closely tracks expectations for the Fed’s upcoming moves, fell to 3.54 per cent from 3.59 per cent late Monday.
Traders upped their forecasts for how deeply the Federal Reserve will cut interest rates at its next meeting in November. They’re now betting on 58.2 per cent probability of another deeper-than-usual cut of half a percentage point. That’s up from a 53 per cent probability the day before, according to data from CME Group.
In other international markets, indexes rose across much of Europe and Asia. France’s CAC 40 jumped 1.3 per cent, South Korea’s Kospi rose 1.1 per cent and Japan’s Nikkei 225 added 0.6 per cent.
With AP
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