China Cuts Rates, Tesla And Alphabet To Publish Earnings Reports

Global markets seem to digest Joe Biden’s withdrawal from the race and his endorsement of Kamala Harris as his replacement in the Democrats’ election campaign. In China, the country’s central bank reduced borrowing costs unexpectedly in an effort to support the economy.

Tesla and Alphabet earnings reports are due to be released later in the day with analysts focusing on them while in Europe, LVMH and Thales reports will take centre stage.

PBoC Cuts Interest Rates

China delivered a surprise on Monday when the People’s Bank of China (PBoC) decided to cut interest rates. This was the first time the PBoC reduced borrowing costs since last August.

A Reuters report quoting BNP Paribas strategists said that “growing expectations for the Federal Reserve to start cutting interest rates also gave the PBOC room to ease its policy, given the pressure the yuan has been under because of a wide yield gap with the dollar.”

Bundesbank Comments On Interest Rates

Bundesbank, Germany’s central bank, noted in its monthly outlook report that the German economy likely grew a little slower than anticipated in the second quarter of 2024.

Bundesbank’s economists noted that labour markets are still operating at a high capacity, wage growth is brisk, and prices, especially in the services sector, are rising strongly, thus making it hard to achieve the inflation target. Therefore, the German central bank analysts suggested that “possible further interest rate cuts should therefore be carefully considered in light of current data.”

ECB’s De Guindos Says Inflation In Line With Projections

Speaking to Europa Press, European Central Bank (ECB) Vice President Luis de Guindos said that inflation readings are practically in line with the bank’s projections, opening the door for discussion over interest rates.

The Spanish policymaker suggested that “data-wise, September is a much more convenient month for taking decisions than July was,” but stressed that “current level of uncertainty is huge, so we have to be prudent when taking decisions.” The ECB’s Vice President noted that the board will be focusing on wage growth developments, a factor that plays role when examining options regarding the monetary policy’s unwinding.

EY Upgrades UK Economy Outlook

EY announced that it raised forecasts for the UK’s economy. The firm now expects gross domestic product (GDP) to grow 1.1% in 2024, significantly up from a previous estimate of 0.7%. EY’s economists suggest that dropping inflation figures would help consumers to better manage their existing budgets as wage growth is projected to slow down.

The report notes that inflation is expected to average 2.5% this year and 2.2% next year while it suggests that the Bank of England could start cutting interest rates in September with one more rate cut taking place by year’s end.

Turkish Central Bank To Decide On Rates

The Central Bank of the Republic of Turkey (CBRT) is set to announce its interest rate decision later today. Economists forecast that the CBRT’s board will keep borrowing costs on hold after today’s meeting.

Economists at Bloomberg Economics suggested that “we expect the statement to be a hawkish one, with policymakers highlighting the risk of a longer-than-expected hold at the current rate. The central bank may also announce a move to tackle lira oversupply in the market.”

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