Early Morning Call: yuan and AUD fall after PBoC's LPR cut, RBA minutes
As widely expected, China cut its lending benchmarks for the first time in 10 months. The one-year loan prime rate was lowered by 10 basis points to 3.55%.
Reserve Bank of Australia
The Reserve Bank of Australia's (RBA) decision to hike rates earlier this month was "finely balanced". Australia's central bank published the minutes of its last meeting overnight, when members decided to raise rates by 25 basis points to 4.1%. The decision was finely balanced because consumer spending is slowing in Australia, but on the other hand, the central bank felt that the risks to inflation have shifted to the upside. Rising wages were a particular worry.
"Members discussed the possibility of implicit indexation of wages to past high inflation and the potential for this to become widespread," the minutes showed. "Similarly, members observed that some firms were indexing their prices, either implicitly or directly, to past inflation." According to the RBA, this jeopardises the return to the RBA's 2-3% target band in a "reasonable timeframe."
PBoC
As widely expected, China cut its lending benchmarks for the first time in 10 months. The one-year loan prime rate (LPR) was lowered by 10 basis points to 3.55%, while the five-year lost policy release (LPR) was cut by the same margin to 4.2%.
There was virtually no doubt the People's Bank of China (PBoC) would cut rates after having done the same last week to its short- and medium-term policy rates.
Airbus
On the opening day of the Paris air show, Airbus announced a historic order from Indian budget carrier IndiGo. After months of negotiations, IndiGo has agreed to purchase 500 narrowbody jets from the A320-neo family, to be delivered between 2030 and 2035.
No financial details were disclosed. After the 470 planes Air India ordered earlier this year, Indian carriers now have the second-largest order book, with an over 6% share of the industry backlog, behind only the United States.
The German government and Intel
Another deal was announced yesterday. This one involves the German government and Intel. The Americans have agreed to invest more than 30 billion euros to develop two chip-making plants in Magdeburg. Berlin agreed on subsidies worth nearly 10 billion euros.
German Chancellor Olaf Scholz hailed this deal as Germany's biggest ever foreign investment. For Intel, this is the third big investment in four days. On Friday, Intel announced a $4.6 billion investment in a chip plant in Poland. On Sunday, Israel announced that the chipmaker would spend $25 billion on a factory there.
FedEx
And it is worth mentioning that FedEx is set to report its quarterly earnings before the market opens. The street expects earnings of $4.86 per share, a 42% increase on the previous quarter but a 29% drop on the same quarter a year ago. Weak global freight demand should weigh on the company's top line.
Revenue is forecast to fall about 7% year-on-year to $22.59 billion. So far this year, shares have risen by about 35%, but only by 3.6% over the past 12 months.
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