— This is the script of CNBC's news report for China's CCTV on July 19, 2019, Friday.
On 18th, the keyword in financial market is rates cut. With the fed's rate cut is almost assured at the end of the month, other central Banks took actions in advance to forestall a shock. Several major central banks took the same actions on 18th, that is rates cut. Let's have a look over Korea who surprised markets.
The bank of Korea (bok) on Thursday cut its benchmark interest rate by 25 basis points to 1.5%, the first cut since September 2016. Only 10 of 25 analysts who interviewed with Bloomberg predicted this result, Reuters' report said the rate cut would be in Aug as Korea increased rates just less than one year. Following Korea, Bank of Indonesia also said cut seven-day reverse repo rate 25 basis points to 5.75%.
South Africa's central bank later cut its key interest rate by 25 basis points to 6.5 per cent. Also on the 18th, Ukraine's central bank cut its main interest rate by 50 basis points to 17 per cent. So far this year, nearly 20 central Banks around the world have cut interest rates. After Federal Reserve chairman Powell released his congressional testimony, global central bank rate cut trend further highlighted. So central Banks around the world have started a new round of interest rate cuts.
In overnight trading on Wall Street, fed officials continued to signal easing. New York fed President Williams said low interest rates are vaccines for the U.S. economy to avoid a crisis. Currently, the U.S. federal funds rate futures trading forecast: the chance of a 50 basis point cut by the end of the month jumped from 34 per cent to 59 per cent.
U.S. stocks ended the day down, but the losses narrowed in the afternoon as the price of gold, an inflation-fighting asset, rose.
The low global interest rate environment favors some emerging market assets, equities, bonds and currencies in emerging market are poised for short-term gains, but the longer-term performance still depends on the economy. Meanwhile, the risks of a return to easing are not to be underestimated.
At present, the International Finance Association's Bank for International Settlements has already warned of the risks posed by excessive easing of global monetary policy. The Bank for International Settlements even pointed out that the "short-term stimulus" brought about by interest rate cuts may do more harm than good.
Now, the big question for international markets is whether China's central bank will follow and launch a new round of interest rate cuts or stay on hold. we will keep a close eye on this.