We look at the latest reactions to recent market falls, ahead of the RBA’ decision tomorrow.
Share prices in Asia have risen after Japan’s central bank promised to help protect markets from the impact of the coronavirus.
It comes after data showed Chinese factory activity fell in February at the fastest rate on record.
On Friday the US Federal Reserve made a similar pledge to stop more big falls on the world’s financial markets.
Last week concerns about the outbreak wiped more than $5 trillion from global stocks.
In a rare emergency statement, Bank of Japan (BOJ) Governor Haruhiko Kuroda said the central bank would take necessary steps to stabilise financial markets: “Overseas and domestic financial markets continue to make unstable movements due to heightening uncertainty over the impact on the economy from the spread of the coronavirus.”
“The BOJ will monitor developments carefully, and strive to stabilise markets and offer sufficient liquidity via market operations and asset purchases,” he added.
The language used in the statement suggested the central bank is ready to make full use of its existing tools to inject funds into the market, before considering what other steps it may take.
It follows a similar unscheduled announcement by the chairman of the US Federal Reserve. On Friday Jerome Powell said the central bank is watching developments closely for risks to the US economy and promised to take action if necessary.
Data released on Saturday showed that China’s official Purchasing Managers’ Index contracted in February at the fastest rate on record. The fall, which was even worse than slump seen during the 2008 global financial crisis, highlights the outbreak’s huge impact on the world’s second-largest economy.
Over the weekend senior officials in President Donald Trump’s administration also tried to soothe concerns about the risk of recession, highlighting the US economy’s underlying strength.
US Vice President Mike Pence, who is leading the administration’s response to the coronavirus, said that the stock market “will come back”, adding that “the fundamentals of this economy are strong”.
– Yes, both the FED & the RBA will cut rates. Because both central banks follow the 3 month T-bill rate.