Daily Market Report 26/08/15

CNY
The People's Bank of China cut its key lending rate by 0.25 percentage points to 4.6% in an effort to calm stock markets after two days of turmoil.It is the fifth interest rate cut since November and will take effect today.

The move has boosted global share prices further, with London's FTSE 100 jumping 3%, while Germany's Dax gained 5% and the Paris Cac rose by 4.1%.

The People's Bank said that the interest rate cut was to reduce "the social cost of financing to promote and support the sustainable and healthy developments of the real economy". It also acted to increase the flow of money in the economy by cutting the amount of cash banks must keep in reserve, effectively freeing them to lend more cash

EUR
German business confidence unexpectedly rose in August as companies brushed off concerns that China’s slowdown will drag on the nation’s economic growth. The IFO institute’s business climate index climbed to 108.3 from 108 in July. The Bundesbank said in its  monthly bulletin that Germany is poised for “solid” growth for the rest of the year. Domestic spending, bolstered by record-low unemployment and borrowing costs, could provide a defense against weakness in China, the nation’s third-biggest trading partner.

China, which devalued the yuan this month as it struggles to manage a slowdown, poses a risk as the country’s demand has been key for German companies in recent years. Germany’s trade deficit with China fell to the lowest this century in 2014 at about 5 billion euros ($5.8 billion). The gap has widened to 7.3 billion euros in the first half of 2015.

USD
Purchases of new homes in the U.S. rebounded in July, bolstering signs the real-estate market is picking up.
Sales climbed 5.4 percent, the biggest gain this year, to a 507,000 annualized pace from a 481,000 rate in the prior month, a Commerce Department report showed Tuesday in Washington. 

Demand for new properties is likely to keep expanding amid strong employment, low borrowing costs and a lack of available existing homes from which to choose. The improving outlook may spur more residential construction, contributing to the economic expansion in the second half of the year.


Key Announcements
USD -13:30: Durable Goods Orders (July) expected to fall to -0.5% from 3.4%
USD -15:00: FOMC Member William Dudley makes a speech.