Stocks mixed; The RBA raises interest rates

The Chinese yuan will not weaken far beyond the 7 level, says Capital Economics

China’s yuan is likely to break the 7 level against the dollar based on yield differentials in the two countries, according to Julian Evans-Pritchard, senior China economist at Capital Economics. But the currency won’t weaken much beyond that, he told CNBC’s “Squawk Box Asia.”

“They are clearly stepping up the intervention, with the goal of defending that threshold,” he said. “I don’t mean it won’t necessarily go through 7 temporarily, but I don̵[ads1]7;t think it will go far beyond that, certainly in a way beyond 7.2 that we saw during the trade war.”

China is reluctant to let that happen, Evans-Pritchard said.

“If it goes beyond that level, expectations of the currency risk being unmoored, you risk seeing much larger capital outflows. And that’s clearly something they want to avoid at the moment,” he said.

The Chinese yuan last traded at 6.9498 against the dollar.

— Abigail Of

Australia’s central bank raises interest rates by half a point

The Reserve Bank of Australia raised interest rates by 50 basis points, in line with analysts’ forecasts in a Reuters poll.

It is the fifth increase in a row since the central bank started raising interest rates in May.

Inflation in Australia was 6.1% in the June quarter, above the target range of between 2% and 3%.

— Abigail Of

The Russian energy minister says price caps will lead to more Russian oil being shipped to Asia

A worker walks from the Sans Vitesse accommodation facility towards the gas receiving compressor station of the Nord Stream 1 natural gas pipeline in Lubmin, Germany, Tuesday, August 30, 2022.

Krisztian Bocsi | Bloomberg | Getty Images

Russian Energy Minister Nikolai Shulginov said the country will send more oil to Asia in response to price caps on oil exports, Reuters reported.

“Any action to impose a price cap will lead to deficits in (initiating country’s) own markets and will increase price volatility,” he told reporters at the Eastern Economic Forum in Vladivostok, according to Reuters.

Last week, G-7 economic powers agreed to cap the price of Russian crude oil to punish Moscow for its unprovoked invasion of Ukraine. Before the invasion, Russia exported about half of its crude oil and petroleum product exports to Europe, according to the International Energy Agency.

– Natalie Tham

Japan’s real wage growth remains negative amid rising inflation: Economist

Japan’s earnings growth for July compared with a year earlier fell to 1.8% from 2% in June, new data released on Tuesday showed.

This is mainly due to a decline in bonuses, Capital Economics Japan economist Darren Tay said in a note.

Earnings should continue to moderate amid tight labor market conditions and a planned 3.3% increase in the minimum wage in the coming months, Tay said.

“With inflation on course to break 3% by year-end, this means real wage growth is likely to remain negative in the coming months, but consumers will be able to draw on pandemic savings to fund spending,” he said.

—Su-Lin Tan

Inflation in New Zealand may have peaked, but prices must rise higher: ANZ

New Zealand’s inflation has peaked at 7.3%, reached in the second quarter of the year, partly due to oil prices falling from recent highs, ANZ Research said in a note.

“But we also think bringing inflation back to 2% will be a long journey, which requires it [Reserve Bank of New Zealand to lift the official cash rate] to 4% by the end of the year and keep it there for several years,” ANZ Research economists Finn Robinson and Sharon Zollner said.

The RBNZ raised interest rates to 3% in August.

Despite the fact that it has reached its peak, economists say that the risk of it rising again is present. For example, if labor costs rise, inflation is unlikely to return to the RBNZ’s target band of 1% to 3% without the cash rate rising above 4%.

“Global inflation risks are also high, with extremely tight labor markets, climate change, geopolitical tensions, energy shortages and trade disruptions all having the potential to generate a sustained period of high global inflation going forward,” they said.

“It would also make the RBNZ’s job of getting inflation back to target much more difficult.”

—Su-Lin Tan

The Reserve Bank of Australia was expected to raise interest rates again for the fifth time in a row

Stocks mixed;  The RBA raises interest rates

The Reserve Bank of Australia is expected to raise interest rates on Tuesday by a further 0.5 percentage points on the back of a “full employment labor market, a massive inflationary overshoot and the fact that economic conditions remain very accommodative”, said Goldman Sachs’ chief economist for Australia. and New Zealand said Andrew Boak.

Boak told CNBC’s “Squawk Box Asia” markets do not expect the central bank to soften its stance on curbing inflation when it announces its interest rate decision at 2:30 p.m. Australian Eastern Standard Time.

“I think the markets will be particularly sensitive to any kind of signal that the RBA is thinking about tapering the pace of tightening to say 25 basis points,” Boak said.

“I think the key language will be retained around expecting to tighten further in the coming months. But also the caveat that policy is not a predetermined path.”

There are risks with continued rate hikes such as “disorderly liquidation in the housing market”, but Boak says “that is not our central scenario.”

—Su-Lin Tan

CNBC Pro: Forget the volatility. Buy this ETF for a long-term growth story, says analyst

Buy this tech ETF to play a long-term growth story, says portfolio manager

Investors should navigate the ongoing market volatility by getting into ETFs with a long-term growth history, according to one portfolio manager.

“The idea of ​​owning an ETF instead of a specific player — you have the whole curve and you’re riding the wave of more capital investment into cyberspace,” John Petrides, portfolio manager at Tocqueville Asset Management, told CNBC.

He names his favorite cybersecurity ETF, along with two others.

CNBC Pro subscribers can read more here.

— Weizhen Tan

Brent oil futures pars gains after OPEC+ production cuts

CNBC Pro: Keep cash while they beat the market, say the pros

Strategists are urging investors to allocate more of their portfolios to cash in these volatile times, as rising interest rates mean they now offer higher returns.

“Cash was king” last month, Bank of America said in a Sept. 1 note, as most asset classes — like stocks, bonds and even commodities — posted losses.

Here’s how to add it to your portfolios, according to the pros.

CNBC Pro subscribers can read more here.

— Weizhen Tan

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