Australia Cuts Interest Rate to Fresh Record Low of 1.5%

Recent data confirm that inflation remains quite low. Given very subdued growth in labour costs and very low cost pressures elsewhere in the world, this is expected to remain the case for some time.

Low interest rates have been supporting domestic demand and the lower exchange rate since 2013 is helping the traded sector. Financial institutions are in a position to lend for worthwhile purposes. These factors are all assisting the economy to make the necessary economic adjustments, though an appreciating exchange rate could complicate this.

Supervisory measures have strengthened lending standards in the housing market. Separately, a number of lenders are also taking a more cautious attitude to lending in certain segments. The most recent information suggests that dwelling prices have been rising only moderately over the course of this year, with considerable supply of apartments scheduled to come on stream over the next couple of years, particularly in the eastern capital cities. Growth in lending for housing purposes has slowed a little this year. All this suggests that the likelihood of lower interest rates exacerbating risks in the housing market has diminished.

Taking all these considerations into account, the Board judged that prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy at this meeting.

Equity Markets: Top performer: India. Worst performer: Japan

Opening Wrap: The Dow Jones industrial average fell 0.15 percent, to 18,404.51, the S&P 500 lost 0.13 percent, to 2,170.84 and the Nasdaq Composite added 0.43 percent, to 5,184.20. The Nikkei was down 0.7 percent at 16,527.17. The broader Topix fell 0.7 percent to 1,312.27 and the JPX-Nikkei Index 400 declined 0.7 percent to 11,798.05. MSCI's broadest index of Asia-Pacific stocks outside Japan was down 0.4 percent. Australian stocks were down 0.6 percent after the Reserve Bank of Australia's policy board decided to cut its benchmark interest rate by 25 basis points to an all-time low of 1.50 percent, as expected. The Shanghai Composite Index was down 0.16 percent.

Currency Markets : Top performer: NZD/USD. Worst performer: GBP/NZD
Opening Wrap:  Against the yen, the dollar changed hands at 102.40 yen, near its three-week low hit on Friday after the Bank of Japan disappointed markets with a less aggressive than expected easing. The euro traded at $1.1165, having moved little so far this week. The Australian dollar fell to as low as $0.75 after the RBA decision but shrank losses to trade down 0.3 percent at $0.7523. The dollar index stood at 95.758, having fallen to as low as 95.384 last week when it posted its biggest fall in three months.

Commodities Markets: Top performer: Copper. Worst performer: Oats
Opening Wrap: U.S. WTI crude was at $40.15 a barrel, up 9 cents from its last close after falling below $40 for the first time since April the previous session. International Brent crude oil futures were trading at $42.34 per barrel, up 20 cents from their last close. Spot gold inched down 0.3 percent to $1,348.46 an ounce. Among other precious metals, platinum was down 0.4 percent at $1,152.49 an ounce. Palladium rose to a 13-month high of $722.70 an ounce on Monday and was up 0.3 percent at $715.40. Silver was nearly unchanged at $20.39.

Treasuries: Top performer: US T-Bond. Worst performer: UK Glit
Opening Wrap:  The 10-year JGB yield rose 11 basis points on day and 24.5 basis points in the past three sessions, which would be the biggest three-day rise since 2013. The Aussie 10-year bonds yield stood just above 1.8 percent, compared with 1.5 percent for its U.S. counterpart and below zero percent in Japan and Germany.