Article / 02 August 2016 at 7:00 GMT

Morning Markets: RBA presents another low



  • UK: Construction PMI (0830 GMT)
  • US: Personal Income & Spending (1230 GMT)
  • US: Auto Sales (TBD)

The day started with a rate cut by the Reserve Bank of Australia. The main cash rate was lowered by 25 bips to a new record low of 1.5% sending the AUD down. 

Later today UK data will give food for thought regarding the Bank of England's policy (read here an earlier outlook by Stephe Pope). Rising macro risk for the UK is in focus with the June update of the Markit/CIPS Construction PMI. The evidence continues to mount that the UK is headed for a recession. The latest smoking gun: Manufacturing survey data. Output in the sector deteriorated in July at the fastest pace in more three years, according to yesterday’s update of the Markit/CIPS UK Manufacturing PMI. Today's news could add more weight to expectations that the Bank of England will move to add more liquidity into the economy by unveiling an interest rate cut at Thursday’s scheduled policy announcement.

Later, two US numbers will be widely read after last week’s disappointing Q2 GDP report: Personal income and spending data for June and the July figures for auto sales. Today’s June report for income and spending will offer more detail on the consumer sector in Q2’s final month.

The upbeat consumer profile we saw in last week’s GDP report will probably be reaffirmed in today’s report. There may be trouble brewing for the US economy in the second half, but if there is it’s not obvious that the trouble’s coming from the consumer sector. 

 Another look at the consumer’s appetite for spending arrives in today’s monthly review of auto sales. Unlike consumer spending generally, the appetite for buying more appears to be ageing. Sales of autos and light trucks in June fell to 16.66 million units (annualised rate), a hefty decline from the 17.4 million-plus units in the previous two months.

Market signals

Asian session

  • The Reserve Bank of Australia cut lending rate by 0.25% to a record 1.5%
  • Australia’s currency slid against all 16 major peers
  • The AUD fell to as low as $0.75 after the RBA decision
  • US oil hovered around $40/barrel throughout Asian trading
  • MSCI's broadest index of Asia-Pacific shares was down 0.4%
  • The Nikkei was down 1.07% at 0504 GMT
  • The Shanghai Composite was up 0.04% at 0505 GMT
  • The Mumbai Sensex had risen 0.38% at 0507 GMT
  • The Hang Seng was closed due to a typhoon
  • The S&P ASX 200 was at 5553.7, down 0.60% at 0539 GMT

Forex ahead

  • AUD fell against USD amid oil price slide, opening at 0.7533
  • It fell to around $0.75 after the RBA rate cut of 0.25%
  • At open, the yen remained strong against the dollar, trading at 102.26

From the Floor

RBA fiddles. ”The market was looking for some forward guidance but that definitely was not the case”, says Van-Petersen

Enticing MSCI. “Buying into MSCI Inc might frighten some as you are buying into multiple highs but there is strong underlying growth in the segment”, says Garnry. 

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion


It seems Brexit may have caught up with the UK and the country's manufacturing sector is among the weakest cogs in the economy, says James Picerno

Rate wait

Markets are bracing for the RBA's decision on rates today, as well as the central bank's statement afterwards, writes the Saxo APAC Sales Trading team

Rally ahead

Shares of Norwegian Seadrill have fell heavily before starting to rally and Johan Berntrop still sees potential ahead and after it reports on August 25.

Full steam ahead. But which direction?

Full steam ahead for Seadrill. But which direction? Photo: iStock

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