Financial markets are clearly spooked by the ongoing US-China trade dispute. China’s quick repartee on reciprocity to US’ US$50b tariff proposals, with aircrafts, automotives and soybeans now being targeted, has raised the stakes and contributed to elevated financial market volatility.
China’s bond market was supported by rising financial market volatility triggered by trade tension last week.
The decline of bond yield has been a global phenomenon in the past few weeks with 10-year US Treasury yield dipped to 2.75 per cent. The falling global bond yields, in our view, were mainly the result of rising suspicious about the global synchronized recovery.
Only two months ago, Bank Negara Malaysia (BNM or the central bank) painted a sanguine picture on Malaysia’s growth outlook. In the recent policy meeting, however, BNM surprised markets by cutting interest rate by 25bps to 3.00%, apparently on growth concerns. What prompted this change?
Only two months ago, Bank Negara Malaysia (BNM or the central bank) painted a sanguine picture on Malaysia’s growth outlook. In the recent policy meeting, however, BNM surprised markets by cutting interest rate by 25bps to 3.00%, apparently on growth concerns. What prompted this change?
What’s going on?
It is the fear of a trade war that has been dominating market news. U.S. President Donald Trump’s announcement of duties of 25 per cent and 10 per cent of steel and aluminium imports, respectively, is slated to see more concrete details this week. Trump announced exceptions for Canada and Mexico pending NAFTA renegotiations, and left the door open for allies to follow suit.
In his first testimony to Congress, new Fed Chair Jay Powell showed it will be more of the same under his leadership. Gradual interest rate policy normalisation will continue, alongside a readiness to alter the trajectory depending on the flow of news on the economy. This is textbook central banking.