Morning Wrap (20.06.2023)

• Indices from Asia-Pacific traded lower during the second trading session of a new week. Nikkei dropped 0.14%, Kospi traded with no change and indices from China traded down by even 1.85%. Australian S&P/ASX 200 was an outperformer, gaining 0.6%

• European index futures point to a slightly lower opening of the cash session on the Old Continent today with DAX trading 0.23% lower.

• US index futures trade slightly below Friday's cash closing prices after a holiday closure on Wall Street.

• Stocks dropped on Tuesday as concerns over China's slow post-pandemic recovery slowed down the global equity rally.

• The decline in Chinese tech companies and real estate firms heightened worries about Chinese growth and the lack of new stimulus measures from Beijing. 

• The PBoC cut its interest rates by 0.10%, 

  • 5-year rate at 4.20% versus 4.15% forecasted and previous at 4.30% 

  • 1-year rate at 3.55% versus 3.55% forecasted and previous at 3.65%.

• Investors were disappointed by the lower-than-expected magnitude of bank lending rate cuts, leading to Chinese real estate companies being among the biggest losers.

• Citi revised down its China 2023 GDP growth forecast from 6.1% to 5.5%, as reported by Reuters.

• The Australian dollar experienced a decrease of over 0.6% following the release of central bank meeting minutes, which revealed a finely balanced case for future interest rate moves.

• Short-term yields on Australian government bonds changed direction and fell after the central bank minutes, while US Treasury yields rose after a day off from trading.

• RBA's Bullock highlighted that Australia's employment is nearly 8% higher than pre-Covid levels, but the labor market remains tight. The RBA aims for a 4.5% unemployment rate to maintain low prices.

• RBA meeting minutes noted that previous rate hikes significantly slowed the economy, and there is uncertainty surrounding household spending and stress. 

• The RBA decided to increase rates due to inflation taking longer to reach its target. A hike in June boosted confidence in the CPI's return to target.

• Japan's Finance Minister Suzuki stated that the US actions would not immediately impact Japan's monetary policy

• The cryptocurrency market traded in a sideways manner during the early part of the day.

• Energy commodities trade mixed - Brent and WTI trade around 0.3% lower while US natural gas prices up 0.1%

• Precious metals trade lower - gold and palladium trade around 0.1% lower while silver dropped 0.20% and platinum more than 0.70%.

Australian dollar (AUDUSD) depreciated after the release of RBA minutes, as it was revealed that the case for future interest rate moves is finely balanced, weakening the currency, H1 interval, source xStation 5.