RBNZ’s rate cut size looms large as US shutdown clouds outlook
OPEC is upping production.
The Reserve Bank’s policy review on Wednesday is looming large in local markets, with the central bank expected to cut the official cash rate by a quarter-point to 2.75%, although some traders are pricing in an outside chance of a larger reduction.
That comes as the US federal government shutdown continues to delay official data, making things slightly murkier for the Federal Reserve when it comes time for its review later this month.
Meanwhile, Australian futures are pointing to new highs for the S&P/ASX 200 index when trading opens across the Tasman, following a mixed Friday on Wall Street when the blue-chip Dow Jones Industrial Average was buoyed by health companies and banks.
And the Organisation of the Petroleum Exporting Countries agreed to lift production by 137,000 barrels a day in November, maintaining the output growth in October, prompting a dip in Brent crude prices.
Rating markets
New Zealand’s S&P/NZX 50 index enjoyed its biggest weekly gain in almost two years last week, ahead of the Reserve Bank’s monetary policy review on Wednesday which is expected to see the monetary policy committee cut the OCR 25 basis points to 2.75%.
Still, the soft June quarter gross domestic product reading raised the prospect of the central bank providing some extra juice for the economy, with an outside chance of a 50 basis point reduction priced in.
“Domestically, the focus this week will be the RBNZ’s monetary policy review on Wednesday, where the bank will cut the OCR, the only uncertainty being by how much, 25 basis points or 50 basis points,” Bank of New Zealand senior markets strategist Jason Wong said in a note.
“A small majority of economists surveyed by Bloomberg expect a 25 basis points cut, which is where BNZ sides, while the OIS market prices 33 basis points, also suggesting more leaning towards 25 basis points than 50 basis points,” he said, referring to the overnight indexed swaps market.
The kiwi dollar traded at 58.33 US cents at 7am in Auckland from 58.19 cents last week.
The US federal government shutdown is clouding the global picture with the delay to economic data, leaving the Federal Reserve to rely on private sector surveys when it reviews policy later this month if the deadlock drags on.
Wavering on Wall Street
Stocks on Wall Street were mixed on Friday, with the Dow Jones Industrial Average gaining 0.5%, with health stocks UnitedHealth Group and Johnson & Johnson, and banks Goldman Sachs and JPMorgan Chase & Co among those pacing gains.
Meanwhile, the Nasdaq Composite dipped 0.3%, with Palantir Technologies sinking 7.5%.
Australia’s ASX200 is taking its lead from the Dow, with futures pointing to a 0.3% gain when trading opens across the Tasman, with the benchmark near record territory.
Brent crude futures prices fell 0.3% to US$64.36 a barrel after eight OPEC+ members said they’d boost production by 137,000 barrels a day in November, the same increase as October. US oil stockpiles grew more than expected last week.
The kiwi dollar traded at 85.96 yen from 85.91 yen last week after Japan’s ruling Liberal Democratic Party elected Sanae Takaichi as its new leader, surprising commentators who’d expected Shinjiro Koizumi to win. Takaichi will become Japan’s first female prime minister if she’s elected when parliament reconvenes later this month.
Trading in Asia will be relatively subdued for much of the week with Chinese markets closed until Thursday for the Golden Week holiday.
And Australian media are providing conflicting reports on the $2 billion sale of the gas distribution firm Clarus Group, with the Australian Financial Review’s Street Talk column saying Brookfield and Powerco are days away from finalising a deal while The Australian’s DataRoom speculates the government’s plans to start procurement for an LNG import terminal could stall the sale if vendor Igneo Infrastructure Partners demands a higher price.
