Moving markets today: Asian stocks slide as Joe Biden exits election race and China surprises with rate cut; Big tech and banking earnings in focus this week
Asian stocks continued to fall on Monday, despite a surprise rate cut by China’s central bank. Wall Street futures, however, strengthened after President Joe Biden announced his exit from the election race. Oil prices rose as investors looked for signs of an upcoming rate cut cycle, possibly starting in September. Gold prices edged up, buoyed by a weaker dollar and hopes of a US rate cut, with market attention shifting to economic data for further insights into the Federal Reserve’s plans. China’s central bank lowered short-term rates to support its economy. This week’s focus will be on US inflation data and earnings reports from major companies and European banks. The Bank of Canada is expected to reduce its rates to 4.5 per cent on Wednesday. Key Wall Street reports include Alphabet, Tesla, and Spotify on Tuesday, with Santander, Deutsche Bank, Lloyds, and NatWest reporting later in the week. Several major FTSE 100 companies will release their quarterly earnings this week, including telecom giants Vodafone and BT, as well as pharmaceutical leader AstraZeneca. Here are five key takeaways for your day.
China’s central bank cuts short-term rates to boost economic support
The People’s Bank of China has reduced its main short-term policy rate for the first time since August 2023, aiming to provide more support to the economy as a Fed rate cut looms.
On Monday, the seven-day reverse repo rate was lowered by 10 basis points to 1.7 per cent to strengthen measures supporting economic stability.
Additionally, the one-year and five-year loan prime rates, which are key benchmarks for bank loans, were both cut by 10 basis points to 3.35 per cent and 3.85 per cent, respectively.
These moves align with the central bank’s plan to implement a rate-based approach to better manage interest rates.
Joe Biden ends reelection bid, supports Harris as Democratic nominee
Biden’s announcement, made through a letter shared on social media, has stirred up the presidential contest with just under four months remaining until the November 5 election.
UK initiates pensions system overhaul to drive economic growth
Britain’s new Labour government is reevaluating the pension system to find methods for directing more investments into productive assets, aiming to boost economic growth and improve retirement incomes.
Announced on Saturday, the review will focus on enhancing the investment capabilities of the 360 billion pound Local Government Pensions Scheme (LGPS), which manages the retirement savings of local authority workers across the UK.
What to watch this week
This week promises to be eventful for the markets, with US inflation data likely to reinforce expectations for a September rate cut.
The earnings season is heating up, with major companies and numerous European banks set to release their reports. Eurozone PMI data will provide more clarity on the path toward the next rate cut by the European Central Bank.
In the UK, a range of important quarterly earnings reports are set to be released this week from FTSE 100 companies, including telecom giants Vodafone and BT, as well as the pharmaceutical powerhouse AstraZeneca.
On Wednesday, the Bank of Canada is expected to cut its rates by a quarter point to 4.5 per cent.
On Wall Street, several major companies will announce their second-quarter results. Alphabet, Tesla, and Spotify will report on Tuesday.
Banking giants like Santander and Deutsche Bank will release their earnings on Wednesday, followed by Lloyds on Thursday. NatWest will wrap up the week with its interim results on Friday.
Asian stocks drop amid China’s rate cuts
Japan’s Nikkei N225 index dropped by 0.9 per cent, while South Korea’s KS11 index fell by 1.0 per cent. Chinese blue-chip stocks, represented by the CSI300, were stable, although they had risen by nearly 2 per cent the previous week. Futures for Hong Kong stocks suggested a steady market opening.
The S&P 500 fell by 0.7 per cent on Friday, ending its worst week since April. The Nasdaq 100 also saw a decline of about 1 per cent, and the Russell 2000 index, which includes smaller companies, slipped by 0.6 per cent.
In the commodities market, gold held firm at $2,408 per ounce, close to the record high of $2,483.60 set last week.
Oil prices increased slightly, with Brent crude rising by 43 cents to $83.06 per barrel and US crude climbing by 55 cents to $80.68 per barrel. This comes amid ongoing conflict in Gaza, with Israeli forces and Palestinian fighters clashing in Rafah on Sunday, showing little sign of a ceasefire.