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    Risk aversion

    The Reserve Bank has left rates on hold at their current all-time low, as it waits for a crucial update on inflation due out on July 27. The central bank retained the cash rate at 1.75 per cent, a level first struck in May after a surprise 25 basis point reduction. The result matched market expectations, with analysts tipping a cautious statement ahead of the release of June quarter consumer price data. 

    A fresh reading on China’s services sector for June showed the mainland’s re-balancing away from the manufacturing sector was continuing apace. The China Caixin services PMI climbed to 52.7 from 51.2 in May, marking the fastest increase in 11 months. Levels above 50 indicate expansion, while levels below signal contraction. Bloomberg reported the June number was an 11-month high.

    BOE has cut regulatory buffers and willl increase bank lending by up to 150mln GBP. Bank will reduce counter cyclical capital buffer to 0.0% from 0.5% with immediate effect until June 2017 at the least.  Bank will give insurers more flexibility to deal with a sharp fall in market interest rates. BOE stands ready to take action to ensure capital and liquidity buffers can be drawn on to support lending.

    Asia markets were mixed on Tuesday, likely taking cues from European equities, which slid Monday on renewed Brexit concerns. In Japan, the Nikkei 225 dropped 0.80 percent in morning trade. In Hong Kong, the HSI was down 0.82 percent. Chinese mainland markets bucked the trend, with the Shanghai Composite higher by 0.57 percent and the Shenzhen composite adding 0.27 percent. DAX opened with a bearish gap and inched towards recent lows  (-1.82%) as risk-off mode from Asia persists.  Sentiment is continued during the US session (S&P500 -1.0%). Crude is also trading lower ahead of API (-5.4%), mainly due to risk aversion. Futures fell  in New York as the dollar climbed and equities slipped.

    Any person acting on this information does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it.

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