International News 10/06

June 10, 2024 No. 90

The Bank of Canada (BoC) has reduced interest rates for the first time in four years

The Bank of Canada has reduced its key interest rate by 25 basis points to 4.75%, marking the first cut in four years. Should inflation continue to decrease, the central bank may choose to maintain the current low interest rate environment. The decision to lower rates was taken in light of positive indicators of underlying inflation. Canada's central bank has joined Sweden's Riksbank and the Swiss National Bank in lowering interest rates in order to boost economic growth and address easing price pressures. It is anticipated that the European Central Bank will also implement a reduction in interest rates. The rate of inflation in Canada has slowed this year, reaching a three-year low of 2.7% in April. Nevertheless, it remains above the World Bank's target of 2%. The bank will continue to monitor inflation until it shows clear signs of decline and confidence that it is approaching the target increases.


Japan's real wages hit a record low

Japanese real wages have fallen for 25 months in a row. In April, workers' real wages fell by 0.7% compared to last year, marking the longest continuous decline on record. The drop in real wages is down to high living costs and stubborn inflation. Consumer inflation reached 2.9% in April. However, there was some improvement compared to the previous month, as the decline in real wages was 2.1% on an annualised basis. On a positive note, wages rose by 2.3% in April. Japanese companies have offered workers pay rises of over 5% this year, the highest in 30 years.


S&P 500 and Nasdaq Set Record Closing Highs Fuelled by Potential Fed Tapering

Wall Street experienced a positive day as the S&P 500 and Nasdaq indexes reached record closing highs. This surge was largely due to the strength of the technology sector stocks. The positive sentiment was driven by investors analysing economic data that could potentially support the start of the much-anticipated policy easing cycle by the Federal Reserve. The Dow Jones Industrial Average closed up by 0.25%, the S&P 500 rose by 1.18%, and the Nasdaq Composite increased by 1.96%. The chip sector saw a significant jump of 4.5%, with Nvidia and Taiwan Semiconductor Manufacturing leading the gains. Technology stocks led the gains in the S&P 500, followed by the communications and industrial sectors. Conversely, consumer staples stocks experienced the largest decline. The May private payroll report, released on Wednesday, further bolstered expectations of interest rate cuts by showing a reduction in labour market tightness.