US mkts end lower as major central banks cut interest rates

The US markets closed marginally lower in thin trading after a round of interest rate cuts by major central banks and as investors remained cautious ahead of Friday’s key government jobs report.

US mkts end lower as major central banks cut interest rates

On economic data front, weekly jobless claims dropped 14,000 to a seasonally adjusted 374,000, marking the biggest decline since April. And according to the ADP national employment report private employers added 176,000 jobs in June. However, the US service expanded less than expected to 52.1 in June, its lowest level since January 2012.

The European central bank cut interest rates to a record low yesterday.

To breathe life into a slowing euro zone economy but steered clear of more dramatic measures such as buying government bonds or flooding banks with fresh liquidity. The quarter-point cut in the European central bank’s to 0.75% was in line with market expectations.

China cuts lending rates by 31 bps down to 6%, even the deposit rates were cut by 25 bps to 3%. The PBOC also lowered the lower band of the lending rate to 0.7 times of the benchmark lending rate.

In data to watch out for in US today, the focus will be on the employment situation. The non-farm payrolls for June are seen significantly higher at 100,000 compared to the 69000 reading in May.

The unemployment rate however remains unchanged at 8.2% on a month on month basis.

In the currency space, the euro struggled at five-week lows against the greenback around 1.23 after the european central bank delivered an expected cut in interest rates but steered clear of bolder moves such as reviving its bond-buying program. The dollar index continues to hold above 82.

In the commodity space, Brent crude pared gains & slipped after surging as high as USD 102 as a result of the dollar’s strength after the ECB rate cut. In Asia trade it has stabilised around the USD 100 mark.

In precious metals, gold slipped some bit but held the 1600 mark due to a lack of more aggressive market stimulus from central banks after China, Europe and Britain eased their monetary policies.

(curtsey : money control)

Rupesh Yatesh Dalal
Head Research Department

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