The Bank of Russia unexpectedly maintained its key interest rate at a record-high 21% , defying analysts’ expectations of another significant hike as inflation remains stubbornly elevated. The decision marks a shift toward a more measured approach in balancing economic growth and price stability. Key Details Inflation Concerns: Annual inflation climbed to 8.9% in November, well above the central bank’s 4% target , with inflation expectations reaching 13.9% in December. Policy Rationale: The central bank cited the significant tightening of monetary conditions after October’s 200-basis point hike as sufficient to resume disinflationary processes. Governor Elvira Nabiullina emphasized avoiding both economic overheating and severe slowdowns. Economic Overheating: Elevated government spending on the war in Ukraine and social programs, coupled with labor shortages and rising wages, have fueled strong domestic demand, exacerbating price pressures...
Markets extrapolate debate to November election outcome: CBA Asian stock sentiment upbeat amid lack of anti-China rhetoric
The dollar edged higher in Asian trading as markets assessed former president Donald Trump as the victor in the first U.S. presidential debate.
Bloomberg’s gauge of the U.S. currency climbed as much as 0.2% on Friday before paring gains, with the index on track for a sixth straight weekly increase. President Joe Biden stumbled through early exchanges in the debate, a performance that may intensify concerns about his ability to defeat Trump in the November election.
Key Takeaways:
- Trump's Economic Pledges: Trump reiterated a pledge to impose 10% duties on imports should he win in November. This move could put upward pressure on inflation, potentially delaying interest-rate cuts and supporting the U.S. dollar.
- Market Reaction: "Markets likely extrapolated today’s debate outcome to the actual election outcome in November,” said Carol Kong, a strategist at Commonwealth Bank of Australia in Sydney. “Trump’s policies are likely to add to inflationary pressures and escalate trade tensions, thereby supporting U.S. interest rates and the safe haven U.S. dollar."
- Asian Markets: Sentiment in Asian equities was largely upbeat, with most regional stock markets advancing during the debate. The lack of hawkish comments on China was seen as a positive surprise by traders, with Chinese benchmarks recouping early losses.
- Currency and Yield Movements: Asian currencies were mostly steady while the Mexican peso dropped almost 1% before paring its loss to 0.2%. Treasury yields ticked higher while U.S. equity futures saw a modest gain ahead of the Federal Reserve’s preferred measure of inflation later Friday.
- Betting Odds: PredictIt’s live betting odds moved in Trump’s favor — he’s now seen as having a 58% chance to win the November vote, up from about 53% just before the debate started.
- Market Sentiment: While the dollar could weaken if U.S. consumer spending data due Friday shows some easing, it’s likely to remain supported into next week as investors brace for election risks in France and the U.K., said Mahjabeen Zaman, head of FX research at Australia & New Zealand Banking Group in Sydney.
Market Analysis: The debate outcome, perceived as favorable for Trump, has fueled market speculation about the November election. Investors are weighing the potential economic impacts of a Trump administration, including increased inflationary pressures and trade tensions.
Asian Equities Outlook: The lack of hawkish comments on China during the debate provided a modest boost to Asian equities. "It's a positive surprise for this part of the world, but only moderately so," said Redmond Wong, market strategist at Saxo Capital Markets. Despite the positive sentiment, the political consensus on dealing with China remains largely bipartisan and could lead to escalating tensions.
Investor Insight: Traders are preparing for heightened volatility around the U.S. election, with historical precedent from the 2016 election influencing market expectations. The debate's outcome has reinforced the view that Trump’s policies could have significant implications for inflation, interest rates, and the U.S. dollar.
For more insights on the U.S. election and market dynamics, read:
- 'Volatile and Unpredictable’: Why Fast-Money Traders Like Trump
- Guilty Verdict Amps Up War-Gaming for Volatility Around Election
- Traders Primed for Biden-Trump Debate to Fuel Stock Volatility
- Trump’s 2016 Win Shook Markets. Traders Won’t Get Fooled Again.
- Deutsche Bank Puts Euro-Dollar Parity in View on Return of Trump
Bloomberg’s coverage continues as the election season unfolds, providing critical insights and analysis on market reactions and economic implications.
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