Talking Points:
- The Asia/Pacific Wednesday belonged to Moody’s
- The agency shocked markets by downgrading China’s credit ratings, citing rising debt and slower growth
- The announcement quickly became the only trading game in town across asset markets
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It was a mixed Wednesday for Asian markets, with gains for some but losses in China after Moody’s shock downgrade of that country’s credit rating.
The agency did not cite immediate worries in its one-notch cut. However it did fret about slowing growth ahead and a likely rise in state debt. Stocks in both mainland China and Hong Kong were unsurprisingly lower on the news, with commodity currencies like the Australian and New Zealand Dollars also pressured. China is among the largest export markets of both nations. However, stocks weren’t universally gloomy. Australia’s ASX may have managed to finish only slightly above flat, but the Nikkei tacked on 0.7%.
The US Dollar was generally a little firmer with investors looking to the minutes of the May 2-3 Federal Open Market Committee Meeting for clues about the likelihood of a June interest rate rise. The NZ Dollar got an early lift from news that its home’s trade surplus hit two-year highs in April. Already hit by that China downgrade, the Australian Dollar didn’t sink much further despite a slip in the Westpac leading indicator.
Crude oil prices were steady, reportedly on hopes that Thursday’s OPEC meeting will keep supply cuts very much front and center. Gold prices were steady too as investors looked to that Fed meeting. At present the chance of a rate rise next month is put at more than 70% by futures-markets.
--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
