mixed stocks; RBA hikes interest rates

The Chinese yuan won’t weaken far beyond the 7 level, Capital Economics says

China’s yuan is likely to break the 7 level against the greenback 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 far beyond that, he told CNBC’s “Squawk Box Asia.”

“They’re clearly stepping up intervention, aiming to sort of defend that threshold,” he said. “I don’t mean that it won’t necessarily go through 7 temporarily, but I don’t think it will go far beyond that, certainly sort of beyond the 7.2 that we saw during the trade war.”

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

“If it goes beyond that level, then expectations for the currency risk becoming unanchored, you risk seeing much larger scale capital outflows. And that’s clearly something that they’d like to avoid at the moment,” he said.

The Chinese yuan was last trading at 6.9498 against the dollar.

— Abigail Ng

Australia’s central bank hikes rates by half a point

The Reserve Bank of Australia hiked rates by 50 basis points, in line with analyst forecasts in a Reuters poll.

That’s the fifth increase in a row since the central bank started raising rates in May.

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

— Abigail Ng

Russian energy minister says price cap will lead to shipping more Russian oil to Asia

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

Krisztian Bocsi | Bloomberg | Getty Images

Russian energy minister Nikolai Shulginov said the country will ship more oil to Asia in response to price caps on its oil exports, Reuters reported.

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

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

— Natalie Tham

Japan real wage growth to remain negative amid rising inflation: Economist

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

This is mainly due to a slowdown 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% hike to the minimum wage over coming months, Tay said.

“With inflation on track to breach 3% by year-end, this means real wage growth is likely to remain negative over coming months, but consumers will be able to draw down on pandemic savings to finance consumption,” he said.

— Su-Lin Tan

Inflation in New Zealand may have peaked, but rates need to rise higher: ANZ

New Zealand’s inflation has peaked at 7.3%, reached in the second quarter of the year, due in part 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, requiring the [Reserve Bank of New Zealand to lift the official cash rate] to 4% by year end, and keep it there for several years,” ANZ Research economists Finn Robinson and Sharon Zollner said.

The RBNZ raised rates to 3% in August.

Despite having peaked, the economists say the risk of it rising again is present. For example, if labor costs rise, then inflation will not likely return to the RBNZ’s 1% to 3% target band without the cash rate rising above 4%.

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

“That would also make the RBNZ’s job getting inflation back to target much harder.”

— Su-Lin Tan

Reserve Bank of Australia expected to raise rates again for a fifth time in a row

Goldman Sachs says Australia's central bank could signal further tightening of monetary policy

The Reserve Bank of Australia is expected to raise interest rates Tuesday by another 0.5 percentage points on the back of a “fully employed labor market, a massive inflation overshoot and the fact that financial conditions are still highly accommodative,” Goldman Sachs chief economist for Australia and New Zealand Andrew Boak said.

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

“I think markets will be particularly sensitive to any sort of signal the RBA is thinking about stepping down the pace of tightening to say 25 basis point increments,” Boak said.

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

There are risks with continued interest rate lifts such as the “disorderly unwind 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, analyst says

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 story, according to one portfolio manager.

“The idea of ​​owning ETF instead of one specific player — you have the whole basket and ride the wave of more capital investment into the cyberspace,” John Petrides, portfolio manager at Tocqueville Asset Management, told CNBC.

He names his favorite cyber security ETF, along with two others.

CNBC Pro subscribers can read more here.

— Wheat Tan

Brent crude futures pare gains following OPEC+ production cut

CNBC Pro: Hold cash as it’s beating the market, say the pros

Strategists are urging investors to allocate more of their portfolios to cash during these volatile times, as interest rate hikes mean it’s now offering higher yields.

“Cash was king” last month, Bank of America said in a Sept. 1 note, as most asset classes — such as 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.

— Wheat Tan


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