Rate Cuts Lead Markets

Japan's Nikkei 225 sprung up overnight to surpass the 14,000 mark for the first time five years. It was fueled by talk on a European Central Bank rate cut as well as the Central Bank in Australia RBA trimming its interest rate. Mario Draghi the head of the ECB yesterday indicated that the central bank intends to try to stimulate the flagging European economy. This sparked speculation around interest rate cuts.

On the other side of the world, the RBA effected a rate cut in the Asian session to a new low of 2.75 percent from 3 percent while it trying to curb slowing growth in its mining sector. The health of this sector is inextricably linked to its currency the AUD, a commodity linked currency. The Royal Bank of Australia expects the rate cut to bring in money into its resources sector and also to help buoy other areas of the country’s economy.

In Spain unemployment numbers for down in April with a drop of 46,1000 unemployed. Analysts had expected a rise of 17,100 in the number. Meanwhile in the Spanish service sector the PMI number dropped to 44.4 in April from 45.3 in the previous month underwhelming expected figure of the 45.6. This shows a number well under the 50 level, which indicates an economy in expansion.

Stocks
The Australian Index was boosted on the news with the S&P/ASX 200 gaining 0.1 percent after rallying form -0.7 percent. The real rising star of the Asian Indices was the Nikkei, which gained to 3.5 percent before closing at 3.3 percent. The Hang Seng rose just 0.1 percent and the Shanghai Composite rose 0.16 percent.

Yesterday’s Europe session saw European stocks mostly lower on negativity over Europe’s outlook for growth. EURO STOXX 50 was down 0.48 percent, the French CAC 4- lost 0.32 percent and the German DAX 30 lost 0.13% in the afternoon session.

U.S. Stocks finished yesterday mostly higher except for the DJIA, which closed slightly down by 0,03 percent, The S&P 500 gained 0.19 percent and the Nasdaq was up 042 percent.

Forex
The Japanese JPY saw a 0.37 percent rise against the USD. The USD itself was mixed against the other currencies in a quiet currency trading session. The rate cut in Australia saw the AUD/USD losing 0.57 percent as the local currency became weakened by making the cost of borrowing cheapened.

Commodities
The commodities were broadly lower as traders sold their positions with profits to move into higher risk investments. Gold dropped 0.57 percent, Silver was down 1.54 percent. Crude oils price reversed wiping out price gains as the commodity dropped 084 percent. Natural gas too declined as the weather forecasts look warmer for the U.S. and Europe. Copper dropped 0.25 percent.

What To Watch Today
It’s to Europe this morning for Germany’s factory orders and to France for Trade Balance then across the pond to the U.S. where Treasury Secretary Lew speaks in the afternoon.