Asian equity markets have reacted poorly to the overnight drift on Wall Street and dip in USDJPY. The Nikkei fell as much as 1.6% before recovering to be off only 0.2% in the early afternoon session. The HSI has fallen 1.6%, Shanghai is off 0.2% and Kospi has dropped 0.6%. S&P futures are down 0.2%.
AUDUSD rallied 0.5% to 0.8966 following the RBA’s announcement of a 25bps cut in the cash rate to 2.5%, reflecting market concern it might cut 50bps. The RBA statement suggested that the AUD could fall further but arguably shifted to a less dovish bias in the final sentence of its statement. After falling overnight, USDJPY initially dropped to a low of 97.84 before bouncing back to 98.27 in response to a Bloomberg headline that Japan’s pension fund could increase its allocation of funds to foreign equities.
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Credit Suisse