The Australian sharemarket is set to rise today following signs that the Chinese and US economies are softening up.
ASX futures were up 42 points or 0.59% to 7,189 this morning.
Flat Chinese data lifts sentiment
On Monday, China’s central bank slashed interest rates following data showing that the extended COVID-19 lockdowns had left their mark and that the property market is only pointing in one direction.
The months of harsh lockdowns, enforced to capture the elusive COVID-zero, brought economic activity to a standstill – the figures now tell the story. The country only started to ease these restrictions this month and it remains to be seen how quickly it recovers.
Sluggish economic data published on Monday showed slowing retail sales and industrial production.
Meanwhile, real estate continues to dive, with property investment from developers contracting by 6.4% in the first seven months of the year, while new home prices in 70 major cities dropped for an 11th consecutive month in July.
Accordingly, the People’s Bank of China dropped the rate at which it provides short-term liquidity to banks from 2.1% to 2% and also cut the rate of its one-year lending facility from 2.85% to 2.75% - the first time since January that these rates have been cut.
While the Chinese economy stalled in the June quarter, the move was nevertheless unexpected. The bank had seemed reluctant to lower rates amid concerns about rising inflation and pressure on the yuan.
Shares in copper producer Freeport-McMoRan and Steel Dynamics jumped 5.3% and 6% respectively following the news out of China.
Federal Reserve takes a break - Federal court doesn't
The biggest news out of the US was a 45-minute court appearance by the former president, now indicted on 37 classified document mishandling charges, to which he pleaded not guilty.
The Federal indictment compounds Trump’s legal exposure as he continues his inexorable march towards the Republican 2024 nomination.
Despite his efforts to stir up his supporter base to cause civic unrest as the criminal justice process runs its course, there was apparently little sign of trouble at the Miami courthouse.
In financial news, US May CPI data was slow, providing the context for the Federal Reserve to take a break from rate hikes for at least this month and maybe the next.
CPI rose just 0.1% in May, down from 0.4% in the previous month – the annual growth rate in May came in at 4%, down from 4.9% in April, the lowest level since March 2021. Annual core inflation eased from 5.5% to 5.3% in May.
Investor optimism that these figures would encourage the Federal Reserve to keep rates on ice put some wind in the sails of the share market, with the Dow up 0.4%, the S&P 500 rising 0.7% and the Nasdaq adding 0.8%.
We saw BHP (ASX:BHP) (3.2%), Rio (2.9%), Atlassian (NASDAQ:TEAM) (3.3%) and Tesla (NASDAQ:TSLA) (3.6%) all make gains overnight.
In other news
Global oil prices rose by 3.4% on Tuesday following a three-month low as China opened up and began to ponder stimulus measures to revive its economy.
Brent crude rose by US$2.45 or 3.4% to US$74.29 a barrel, while US Nymex added US$2.30 or 3.4% to US$69.42 a barrel.
Base metal prices were on the up on Tuesday after the central bank of China, the world’s second-largest economy and top metals consumer, lowered a short-term lending rate for the first time in 10 months.
Copper futures rose by 2.1% while aluminium futures were up by 0.4%.