International financial news on 14/6/2023

China’s central bank cuts interest rates for the first time in nearly a year, yuan weakens

On June 13, the People’s Bank of China (PBOC) cut short-term lending rates for the first time in 10 months, demonstrating an attempt to restore market confidence and spur a recovery. post-pandemic in the world’s second largest economy..

Accordingly, the PBOC cut the 7-day repurchase rate by 0.1%, bringing the lending rate from 2% to 1.9%, and injecting 2 billion yuan (US$279.97 million) through the loan instrument. short-term bonds.

It is the PBOC’s first move since August 2022 and follows the country’s largest banks cutting deposit rates last week, signaling that Beijing is likely to ease monetary policy more. more in the near future.

At the same time, the move also comes ahead of the PBOC’s decision on the average lending facility rate (MLF), which is expected to be announced on June 15. Meanwhile, the bank’s basic lending interest rate is scheduled to be announced on June 20.

“The central bank’s decision to cut interest rates was not a complete surprise to the market. Commercial banks have lowered deposit rates and PBOC governor Yi Gang also recently mentioned an increase. strengthening counter-cyclical correction,” said Ken Cheung, Asia head of FX strategy at Mizuho Bank.

He added that the PBOC may be looking to cushion the impact of future policy easing on the Chinese yuan ahead of the US Federal Reserve’s policy meeting this week. 6), especially as rate cuts in China could further widen the yield gap with the US, even if the Fed pauses its monetary tightening program this month.

Immediately after the PBOC interest rate news came out, the yuan fell to 7.1646/USD, hitting its weakest level since November 29, 2022. The weakening of the yuan against the US dollar is not a good sign, because China will mature its 200 billion yuan medium-term loan facility on June 15.

Atlantis chief investment officer Yang Liu told CNBC’s “Street Signs Asia”: “Basically what the Chinese government is expected to do is do its best to boost domestic consumption, especially in the region. private sector”.

In its June economic outlook report, UBS Global Wealth Management also expects Beijing to ease monetary policy further in the future.

“We believe monetary policy will continue to focus on maintaining ample liquidity and steady credit growth,” the report said, predicting the central bank would do one or two more “modest” reserve requirement cuts or cut the average lending rate by 0.05 to 0.1% in the second half of the year.

However, larger strides could exacerbate foreign exchange pressures, which policymakers want to avoid and come with diminishing returns if not accompanied by demand stimulus,” the report said. added.

Waiting for news from the Fed, S&P 500 and Nasdaq Composite hit their highest in more than a year

Ending the session on June 12, the S&P 500 index gained 0.93% to close at 4,338.93, with a steady increase throughout the trading day. This index reached the highest closing level since the end of April 2022. Similarly, the Nasdaq Composite Index gained 1.53% to close at 13,461.92, also reaching its highest level since April 2022.

Additionally, the Dow Jones Industrial Average rose 189.55 points, or 0.56%, to close at 34,066.33.

Supported by gains in large-cap stocks such as Amazon, Apple and Tesla, the S&P 500 has now recovered 21% from its October 2022 low.

Tesla shares rose 2.2% in just June 12 and are now up for 12 straight trading sessions, a record for the electric carmaker. Apple and Microsoft shares are each up about 1.5% on the day, and have also recorded year-to-date gains of 41% and 38%, respectively.

Oracle shares also hit a record high of $116.43 on the day, up 6% on the day, +39% year-to-date.

Of the 11 S&P 500 industry indexes, eight rose, led by the information technology (.SPLRCT) sector, up 2.07%, followed by a 1.74% gain in the consumer index. arbitrary (.SPLRCD). As you can see, the recent rally in equities has extended from tech stocks to include more sensitive economic sectors like energy as well as small-cap stocks, as data continues to show. The US economy is resilient despite higher interest rates.

Goldman Sachs on Friday raised its year-end price target for the benchmark S&P 500 index (.SPX) from 4,000 to 4,500, citing an expanding market rally.

Nasdaq shares fell nearly 12% after the exchange operator said it would buy software company Adenza for $10.5 billion, calling it an expensive bet by analysts.

By contrast, Biogen shares rose 1.5% after the US FDA’s advisory panel unanimously endorsed its Alzheimer’s drug, Leqembi.

Broadcom shares rose 6.3% after Reuters reported that the chipmaker had obtained the EU’s conditional antitrust approval of its proposed acquisition of cloud computing company VMware (VMW.N). ) worth $61 billion. The news lifted the Philadelphia Semiconductor Index (.SOX) to 3.3%, bringing the index’s recovery in 2023 to more than 44%.

The CBOE Volatility Index (.VIX) rose to around 14.8, its highest level since the beginning of last week.

Volume on US exchanges was relatively low, with 10.2 billion shares traded, compared with an average of 10.6 billion shares over the previous 20 sessions.

Positive signs in the market make experts say that Wall Street is in the middle of a bull period. This comes as investors place their bets that the Federal Reserve will pause its rate hike program this month.

On June 13, the US Department of Labor is expected to release the consumer price index (CPI) at stable levels, showing a slight decrease in inflation in May. On the same day, the Fed will also kick off its pulling policy meeting. 2 days long (June 13-14).

Currently, traders see a 76% chance that the central bank will keep interest rates at 5%-5.25% this month, but there is a 71% chance that the Fed will continue to raise rates in July. according to the CME Fedwatch tool.

China signs a series of agreements worth 10 billion USD with Saudi Arabia

The world’s leading oil exporter Saudi Arabia hosted the 10th Arab-Chinese Business Conference at King Abdulaziz International Convention Center on June 11-12.

According to the Saudi Ministry of Investment, the conference attracted more than 3,500 government officials, investors and executives from many leading companies in both China and Saudi Arabia.

The conference is seen as an important step in Saudi Arabia’s efforts to promote trade cooperation with China. The conference took place against the backdrop of growing trade and diplomatic ties between China and Middle Eastern countries. Saudi Arabia accounted for 25% of China’s total trade of $432 billion with Arab countries in 2022.

According to Sputnik, Chinese and Saudi companies have signed 30 agreements worth nearly 10 billion USD, mostly related to the fields of technology, renewable energy, agriculture, real estate, minerals, logistics. , travel and healthcare.

Specifically, the highest agreement worth up to $ 5.5 billion between the Saudi Ministry of Investment and Human Horizons, a Chinese company that produces electric and self-driving cars, to establish a research and development joint venture, manufacture and trade in automobiles. In addition, the investment amount includes separate “partnership agreements” and a “framework agreement” involving other companies.

Another $533 million agreement was signed between Amar Al-Oula of Saudi Arabia and Zhonghuan International Group (Hong Kong) to establish an iron ore processing plant and produce iron pellets for smelters. in Saudi Arabia.

In addition, Saudi Arabia’s ASK Group and China National Mining and Geology Corporation signed a $500 million cooperation agreement to develop, build and operate a copper mining project in the area. region of the Arabian Peninsula.

Saudi Arabia’s Foreign Minister, Prince Faisal bin Farhan, emphasized that the Arab-Chinese Business Conference is an opportunity to build a common future towards a new era that benefits the people of both countries.

Referring to criticism of strengthening ties with Beijing, Prince Abdulaziz Salman stressed that he did not care about it “because as a businessman you will have to go where there is opportunity”.