Global risk appetite improved overnight as various Central Bank’s talked up stimulus measures in the face of weakening economic fundamentals. Global stock markets rose as talk around the globe hinted at lower-rate policy and more stimulus measures. Market sentiment was also helped by news that some U.S companies would be allowed to do business with Chinese company Huawei for another 90 days. Currency markets have however been fairly subdued with the NZD drifting lower in a relatively tight range overnight.
Trump Continues to Attack U.S Fed
President Trump took another aim at the Fed, saying they should cut interest rates by 1% in a short period of time, with perhaps some quantitative easing as well. Meanwhile US Commerce Secretary Wilbur Ross said that he was very concerned about how the Fed monetary policy was affecting the strength of the dollar. Ross also downplayed concerns over a looming recession after the US treasury yield curve was temporarily inverted last week.
Germany Looks at Stimulus as Recession Looms
The positive vibe across markets was also helped by growing speculation that Germany will ease fiscal policy to boost their economy. Comments from the German Finance Minister over the weekend said the government would aim to increase spending by 50 billion Euros in case of an economic crisis. This follows comments last week from German Chancellor Merkel who said the government will react “depending on the situation”. Germany’s central bank has warned that the economy is likely to face a recession in the 3rd quarter, due to a fall in industrial production, and a decline in German exports.
The Day Ahead
Fairly quiet day ahead on the local front with the NZD likely to take direction from global market risk sentiment. Tonight sees another GDT dairy auction which is expected to be on the soft side once again, while across the ditch there is the release minutes from the RBA August policy meeting.
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