Australia’s central bank raises interest rates by 25 basis points; Asia Pacific markets are mixed

In a surprise move, the Reserve Bank of Australia raised its interest rate target by 25 basis points to 3.85%, stating that inflation in the country “remains very high”.

Economists polled by Reuters had largely expected the central bank to maintain its benchmark interest rate at 3.6%.

“While recent data has shown a welcome decline in inflation, the central forecast remains that it will be two years before inflation returns to the top of the target range; inflation is expected to be 4 percent in 2023 and 3 percent in the middle-2025.”

The RBA added that its priority “remains to get inflation back on target” and left the door open for further hikes in the future.

“Further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable time frame, but that will depend on how the economy and inflation develop,” she said.

The yield on the 10-year Australian government bond settled at 3.472% shortly after the decision.

Currencies in the Asia-Pacific region strengthened considerably along with the Australian dollar which strengthened marginally ahead of the central bank’s interest rate decision.

The Australian dollar stood at 0.6632 against the US dollar, and the New Zealand dollar rose 0.2% to 0.6180 against the greenback.

The Japanese Yen also rose slightly to 137.37 as the US Dollar Index fell 0.12% to 102.3.

The Korean won also strengthened 0.2% to 1340.2 against the dollar.

Chief Executive John Lee said at a press conference on Tuesday that Hong Kong recorded economic growth of 2.7% in the first quarter.

The economy contracted by 4.2% in the last quarter of 2022 compared to a year ago.

“Although the number of exports in the first quarter is still declining, China’s economy is constantly growing rapidly and the recovery of Hong Kong’s aviation capacity is accelerating,” Li said.

“I think Hong Kong’s economy in the second quarter will be better than the first quarter, and this year’s economy will be better than last year,” he said.

– Vivian Cam

DBS Group Holdings reported record revenue and net profit for the first quarter of 2023.

Revenue came in at S$4.9 billion, up 34% year-on-year, while net profit came in at S$2.57 billion, up 43% compared to the same period last year.

In a statement, DBS said this was due to its “high net interest margin, continued business momentum and resilient asset quality.”

DBS shares were up 0.55% on Tuesday.

Private surveys from S&P Global showed that factory activity in five Asian countries mostly rose in April.

Manufacturing expanded in Thailand, Indonesia, Myanmar and the Philippines, with Thailand leading the gains

Thailand’s manufacturing sector expanded faster in April, with a PMI of 60.4.

However, Malaysia was the only outlying country, with a Manufacturing PMI of 48.1, marking the eighth consecutive month of contraction.

– Lim Hwi Ji

While other markets have been volatile this year, technology has soared – the Nasdaq is up 16% in the year so far.

Chief Technology Analyst Mark Mahaney of Evercore ISI gave the tech stock up nearly 50%, saying it has a “very attractive” valuation.

He gave his second pick a higher score of 152%.

CNBC Pro subscribers can read more here.

– Wizen tan

A private survey on Tuesday showed South Korea’s manufacturing PMI for April rose to 48.1, up from March’s figure of 47.6.

Despite the improvement, this was the tenth month in a row S&P Global PMI for South Korean manufacturers It remains below the 50 mark that separates contraction from growth.

“Weak customer demand both domestically and internationally has been central to the recent downturn and contributed to a strong decline in new orders,” Usama Bhatti, an economist at Standard & Poor’s Market Intelligence, said in a statement on Tuesday, adding that

Bhatti also noted that as such, South Korean manufacturing firms subsequently reduced production levels, input purchases and employment.

– Lim Hwi Ji

The Australian central bank is expected to maintain its benchmark interest rate at 3.6% when it announces its decision on Tuesday.

A Reuters poll of 34 economists showed that 26 of them expect the RBA to maintain interest rates at current levels, while the remaining eight expect a rise of 25 basis points.

If the RBA raises interest rates to 3.85%, it will be the highest level since April 2012.

Inflation in Australia – a key data point for the Reserve Bank of Australia – eased to 7% in the first quarter, down from the 7.8% recorded at the end of 2022.

– Lim Hwi Ji

South Korea’s inflation rate eased to 3.7% in April, lower than March’s figure of 4.2%.

This was also the slowest pace of inflation in 14 months, and the third consecutive month of decline.

The 3.7% figure was also largely in line with economists’ forecasts of 3.75%.

In April, South Korea’s central bank kept its benchmark interest rate at 3.5%.

– Lim Hwi Ji

SoftBank’s chipmaker, Arm, has secretly filed for a US stock market listing, fueling speculation about a management buyout of SoftBank’s Nikkei. mentioned.

The report added that SoftBank Group has raised billions of dollars using its stakes, including its stake in Alibaba as collateral — and that the Japanese company could use Arm shares instead, which would enable a renewed investment by the Vision Fund.

Nikkei also reported that SoftBank could go private if it sold about half of its stock portfolio, and Arm’s higher valuation would widen the gap between the SoftBank Group’s valuation and that of its assets, making a purchase look more likely.

SoftBank shares rose 0.7% in the Tuesday morning session in Tokyo.

The dollar rose against the Japanese yen on Monday, hitting a high of 136.98 for the US dollar. The dollar is trading at the highest level against the yen since March 10, when the dollar-yen pair was 136.99.

The greenback is now also within walking distance of a high not seen since March 9, when the dollar traded at 137.37 against the yen.

Elsewhere, the euro also rose against the yen, recording 150.94, the highest trading level since September 30 of 2008.

– Brian Evans, Gina Francola

JPMorgan Chase CEO Jamie Dimon sees the crisis that contributed to the collapse of three banks in recent weeks as having largely ended after the banking giant acquired First Republic.

“There may be another one, smaller, but this pretty much solves it all,” he said during a conference call with analysts after the deal was announced. “This part of the crisis is over.”

The comments from Dimon come after the FDIC took over the bank, which has fallen victim to a deposit flight in recent weeks in the wake of the Silicon Valley bank meltdown. JPMorgan will acquire most of the beleaguered company’s assets and take control of its deposits.

– Heo Soon, Samantha Sobin

First Republic’s failure over the weekend has not yet had much impact on other regional bank stocks.

The SPDR S&P Regional Bank ETF (KRE) was down less than 0.4% in premarket trade. Backwest Bancorp shares fell 2.4%, while Western Alliance shares rose slightly. First Horizon and Zions Bancorp fell about 0.2%.

First Republic stock has fallen sharply and is now trading at less than $2 a share, and the stock is likely to be downgraded to zero. However, First Republic weighed less than 0.15% in the KRE as of Friday’s close.

Manufacturing activity in the United States contracted for the sixth consecutive month in April, although it was less than expected, according to a report released Monday from the Institute for Supply Management.

The ISM Manufacturing Purchasing Managers’ Index came in at 47.1%, accounting for the share of firms reporting expansion in the month. That was higher than the 46.3% in March and better than the 46.7% estimate from the Dow Jones.

Still, the details may be troubling for Fed officials looking to keep inflation under control.

The price index rose by 4 points, to 53.2%, returning to expansion territory, while the employment index increased by 3.3 points, to 50.2%. Inventories, which had been a big drag on growth in the first quarter, fell 1.2 points to 46.3% while new orders rose 1.4 points to 45.7%.

– Jeff Cox