The European Central Bank’s Mario Draghi cut interest rates further below zero and restarted quantitative easing, despite resistance from ECB governors representing core euro-area countries. The ECB reduced the deposit rate to minus 0.5% from minus 0.4%, and said it’ll buy debt from Nov. 1 at a pace of 20 billion euros ($22 billion) a month for as long as necessary to hit its inflation goal. In an unprecedented revolt, central bank governors from Germany, France and the Netherlands opposed immediate resumption of bond purchases, sources say. Other dissenters included, but weren’t limited to, their colleagues from Austria and Estonia. Draghi’s decision to press ahead risks leaving his successor Christine Lagarde with a headache when she starts in November.
HKEX’s China Ties
Hong Kong Exchanges & Clearing’s drama-free ties to Beijing used to be a bonus. But with questions mounting over the Chinese government’s role in Hong Kong affairs, those ties now represent a threat to HKEX’s $36.6 billion bid for the London Stock Exchange Group. The Hong Kong government, which owns 6% of HKEX, appoints six of the company’s 13 board members, and the city’s chief executive — a person appointed by Beijing — picks the company’s chairman. So the exchange operator comes under a level of political oversight unusual among other developed market bourses. “The last thing LSE wants to consider is foreign ownership, particularly a Chinese player to control it,” said Cecelia Zhong, a former HKEX executive.
Asian equity futures are higher after optimism about the outlook for a U.S.-China trade agreement and the ECB’s stimulus announcement helped U.S. stocks eke out gains. The S&P 500 Index closed just 0.5% below its all-time high, while the euro gained and sovereign bonds were mixed. Any steps by China and the U.S. to ease tensions ahead of face-to-face talks in Washington in the coming weeks would support sentiment as investors await monetary decisions from more of the world’s major central banks, including the Fed.
Australia’s biggest economic stimulus since 2009 isn’t working. You might expect the economy to be flying after recent back-to-back interest-rate cuts and tax rebates delivering up to A$1,080 ($744) to households across the country. But these aren’t normal times. Australian firms and households are deep in the doldrums, with little sign that recent Reserve Bank and government efforts will change that. Earlier data showed that retail sales actually went backwards in July. With the RBA’s cash rate now at a record-low 1%, economists are betting the central bank will be forced to deploy unconventional monetary policies next year unless the government significantly lifts fiscal stimulus.
What We’ve Been Reading
This is what’s caught our eye over the past 24 hours.
- Apple’s market capitalization rises above $1 trillion again.
- A Singapore lender that still uses faxes is applying for a virtual bank license.
- Thomas Piketty is back, with a 1,200-page guide to abolishing billionaires.
- Toyota is trying to figure out how to make a car run forever.
- Free bank accounts may become a thing of the past in Japan.
- The next generation of aircraft may track your bathroom visits.
- Tokyo’s iconic Hotel Okura is back, after a $1 billion makeover.