HONG KONG: Asian stock markets retreated on Tuesday and the Australian dollar stumbled after the central bank cut interest rates for the second time in four months as the region’s growth falters in the face of slowing demand from China.
Financial spread betters expected European markets to open mixed, with Britain’s FTSE 100 likely to open 0.7 percent higher, Germany’s DAX seen 0.2 percent lower and France’s CAC 40 seen down 0.1 percent.
The Reserve Bank of Australia cut its cash rate a quarter point to an all-time low of 2.0 percent to buttress the economy against slowing mining investment and push the stubbornly strong local dollar lower, in line with market expectations.
The Australian dollar fell a quarter of a cent initially, but then quickly rebounded as some investors bet the RBA’s current easing cycle might now be over.
“Cautious and uncertain households mean rate cuts are less effective today,” said Jasmin Argyrou, senior investment manager at Aberdeen Asset Management.
“A low AUD is still the best chance of rebooting the economy, but for that to happen the RBA will need to leave the cash rate at record lows, and for a record length of time,” Argyrou said referring to the Australian dollar.
Australian stocks ended flat, while the Australian dollar was changing hands at $0.7908 in volatile trade.
MSCI’s broadest index of Asia-Pacific shares outside Japan extended losses and was down 0.5 percent.
In China, benchmark stock indices fell between 1 to 3 percent, led by financials as media reports of tougher margin requirements added to concerns about market liquidity ahead of a new batch of share listings.