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Global econ: Oz rate cut, PMIs compound gloom

Credit: Reuters Studio
Published on October 1, 2019 - Duration: 01:48s

Global econ: Oz rate cut, PMIs compound gloom

Australia cut rates for a third time this year on Tuesday as it acknowledged that global risks were threatening its nearly three decades of uninterrupted growth.

And, as David Pollard reports, key PMI surveys in Europe and Japan showed manufacturing is still struggling in the face of trade headwinds.

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Global econ: Oz rate cut, PMIs compound gloom

(SOUNDBITE) (English) AUSTRALIAN TREASURER, JOSH FRYDENBERG, SAYING: "The Reserve Bank has taken into account global movements in interest rates which have been downwards." Monetary easing after ECB and Fed rate cuts last month.

It's a fashion Australia's central bank followed on Tuesday (October 1) with its third rate cut this year - to an all-time low.

After 28 years without recession, Australia is on the back foot.

Josh Frydenberg is its treasurer.

(SOUNDBITE) (English) AUSTRALIAN TREASURER, JOSH FRYDENBERG, SAYING: "We do face some significant challenges.

Those challenges are internationally with the global trade tensions between China and the U.S., but they are also domestically particularly with the punishing impact of the drought and floods." Internationally, Tuesday belched up more signs of distress.

Key PMI surveys suggested euro zone manufacturing contracted at its steepest rate in almost seven years in September.

Japan's also shrank, they say, in the face of the Sino-US trade war.

Europe's share markets reacted to the news by reversing strong early gains.

Recent diplomatic moves towards fresh trade talks have done little to ease their concerns.

Oliver Roth of Oddo Seydler Bank.

(SOUNDBITE) (German) HEAD OF SPECIALIST FLOOR EQUITIES AT ODDO SEYDLER BANK, OLIVER ROTH, SAYING: "The positions have hardened and I believe not much will change until the hot phase of Donald Trump's election campaign." A steady reading for India's manufacturing sector was one pocket of positivity and Turkey's PMI rose to 50 - the threshold for growth.

But the main winner of the day was the dollar, rising to a 29-month high as U.S. data continues to offer upside surprises.

Helping to get it there: the Ozzie dollar, falling after the RBA not only cut rates but signaled it stands ready to do so again if needed.

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