Fed the highlight as central banks in the spotlight; Fitch downgrades France
Australian futures pointing to a soft start for the week.
The Federal Reserve’s upcoming interest rate review on Wednesday in the US is the big show with a cut widely expected after a string of soft jobs figures and benign enough inflation data, although plenty of other central banks are meeting this week, including Japan, the UK and Canada to name a few.
The prospect of rate cuts kept Wall Street frothy last week, although it was just the tech-heavy Nasdaq Composite on the green side of the ledger on Friday, with Elon Musk’s Tesla driving gains on the rate sensitive bourse, and Australian futures are pointing to a soft start for the antipodes when the ASX opens today.
Across the Atlantic, France had its credit rating cut by Fitch Ratings as Europe’s second-biggest economy grapples with mounting public debt and an increasingly unstable political environment.
And tougher capital rules in Switzerland have prompted to banking giant UBS to seriously consider packing up and heading to the US.
Great expectations
Stocks on Wall Street were mixed on Friday, having set new records through the week as expectations mount for the Federal Reserve to cut the federal cuts rate by a quarter point to a range of 4%-to-4.25%, with an outside chance priced in for an even steeper 50-basis-point reduction.
The kiwi dollar traded at 59.57 US cents at 7am in Auckland from 59.69 cents last week.
The tech-heavy Nasdaq was the only major US index to rise on Friday, up 0.4%, with a 7.4% gain for Tesla driving the bourse higher, while the S&P 500 dipped 0.1% and the Dow Jones Industrial Average fell 0.6%.
“The S&P ended flat on Friday with the index consolidating near all-time highs after a solid week of gains,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note. “Weaker than expected US consumer confidence data did little to alter expectations for the FOMC this week,” he said, referring to the federal open market committee.
The Fed is just one of a handful of central banks reviewing policy this week, including in Japan, the UK, Canada, Brazil, Norway and South Africa.
French connection
Meanwhile, across the Atlantic stock markets were mixed with the UK’s FTSE 100 dipping 0.2% on Friday and Germany’s DAX 30 and France’s CAC 40 marginally lower and higher respectively. The kiwi traded at 50.76 euro cents from 50.91 cents on Friday.
Fitch Ratings cut France’s credit rating to A-plus from AA-minus over the European nation’s mounting levels of public debt and increasingly fragile political system, which has seen its second government crumble this year over plans to get the books in order at a faster pace.
Swiss banking giant UBS has reportedly been discussing shifting its headquarters to the US – potentially through the acquisition or merger with a US bank – as the financial services firm eyes ways to avoid restrictive capital requirements that are set to come into place after UBS took over its one-time rival Credit Suisse.
The mixed tenor has set the scene for a soft start to the week in the antipodes, with Australian futures pointing to a 0.7% decline for the S&P/ASX 200 index when trading opens across the Tasman. New Zealand’s S&P/NZX 50 index was marginally higher last week, with a slew of firms shedding rights to upcoming dividend payments. Chorus is the latest company to go ex-dividend, today giving up rights to its upcoming 34.5 cents per share payment.
The domestic focus this week is on June quarter gross domestic product figures, which are expected to show the economy shrank 0.3% in the period, although forward-looking indicators have tended to show that might’ve been the trough of the protracted downturn.
Local data today include the BNZ-BusinessNZ performance of services index.
